When investing in the stock market, it is very difficult to determine when to get in and when to get out. Is the stock market over-valued, under-valued, correctly priced? Depending on who you listen to, what you frame of mind is, if you are a Democrat or a Republican, your answer will vary depending on the time of day.
That being said, I’m not going to try to explain why the stock market was up big two days in a row (December 31st and January 2nd). Everyone knew that we were either going over the Fiscal Cliff or we weren’t. When we didn’t go over the cliff, people celebrated, but was that the right thing to do? I’m not so sure.
However, there is one thing that I am certain of. You can not expect anyone to be able to time the market. Either you are an investor and you are in the market or you might as well stay out. This article does a great job explaining how difficult it is to time the market. If you are out of the market on days like the past 2 where the market was up almost 4.3% or if you miss the market bottom by only a week, your returns are significantly diminished.
I’m not saying that you need to be a die-hard buy and hold investor that never sells any position. What I am saying is that you need to be there. Invest wisely, but understand that all investment returns require risk in order to gain the returns.