Why time in the market is more important than timing the market

When it comes to property investment, many buyers and investors become obsessed with the idea of timing their property purchase with the view that buying at the bottom of the market for the cheapest price is a formula for property success. Considering the current property market conditions, this seems more prevalent than ever though it is the wrong strategy to employ.

In fact, timing the market is one of the biggest mistakes a property investor can make.

You see… time in the market is far more important than timing the market.

And here’s why.

Instead of timing the market, sophisticated property investors understand that they need to focus their efforts on buying an investment-grade property, in an A-grade location at the time which suits them.

The important part of that statement is that they always buy “investment grade” properties in good locations because these are the type of properties which will outperform in the long run. Smart investors don’t wait around for the lowest prices or for a downturn, they buy when they have their finance ready. It can be tempting, especially in a downturn like we’re currently experiencing, to hang on and wait for prices to lower further with the idea that you’ll get more ‘bang for your buck’.

The reality is, that investment-grade properties in good locations are more stable than in other markets and the point of the cycle is less important if you’re committed to holding the property long-term.

This means that it doesn’t really matter when you enter the market if the value of your property will double in value over a 10 year period as it has over the last 40 years. What’s important is that you hold the property for long enough to see compound growth.

This strategy would also help you to ride out any temporary market fluctuations.

That way, when it comes time to sell down some of your assets when you reach retirement, or whenever is the right time for you, you will have created wealth from your portfolio's compounding equity over the decades. The risk is that by waiting for the ‘perfect time’, property investors risk missing out on time in the market which translates into money earned, or they could even miss out on investment grade opportunities altogether.

Source: Why time in the market is more important than timing the market (propertyupdate.com.au)