Asked on 03 Dec 2020
Is it better to trade on your own when the market is undervalued?
It’s risky to try to time the market, the market is extremely unpredictable. Nobody can consistently time it all the time. Those who did are probably lucky, i mean there are a huge number of investors around the world. Also nobody expected the stock market to rise consistently since the crash in March 2020. The market is at all time high right now. I don’t thing it’s undervalued.
Personally, I won’t do trading, many experts will recommend retail investors to avoid too.
3 more comments
08 Dec 2020
If active investment really work, why don’t most fund manager beat the index consistently? Even if funds only charge a 0% management fee, they won’t outperform the market significantly too. Active vs passive debate has been ongoing forever n it won’t end for now. Everyone has a different view on this.
08 Dec 2020
That's a great qns. To answer that we must first understand who are the bulk of people who invest via funds. In general many retail investors who don't know much about the market /do not have much time to. That makes it very very difficult for fund managers. Because most people are risk averse. They do not understand volatility and corrections are opportunities which may cause them not to take advantage of the opportunity. Fund managers do not have the chance to utilise on that chance by going in big in times like these. Also, during times of sector rotations, there is a lot of hype on stocks that are performing well and people tend to chase them. With trading sure, but investing, this severely reduces your ROI. Instead we should be looking at the under performing stocks to pick them up while people are dumping them, sure we will never know how long it takes for them to come back up, but when they do the ROI is much greater. Fund managers however are stuck in this scenario where if they share they are focusing on the less well performing stocks and not chasing after the stocks that are booming up 20-30% in a few weeks, a lot of their clients may not understand the approach and start pulling out/stop investing as much with them. Hence, to keep people invested in them, they offer diversification to cater to the reduce volatility people like while being unable to take advantage of great opportunities even if they understand it.