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Equity Timing: A Challenging Pursuit
Equities typically offer higher returns than risk-free assets, but the variability in equity returns complicates effective timing of the equity premium. While investors often aim to buy low and sell high based on valuation metrics, short-term market movements make this strategy unreliable. Theoretical concepts may suggest optimal selling during high valuations and drawing from cash reserves at low valuations, but practical application reveals significant challenges and inconsistent results in executing this approach successfully.