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Summary

Market timing is difficult for the professionals. Those professionals who try to time the market frequently have a high degree of market experience, investment education, investment resources, and the time for a lot of effort. And yet, even the professionals usually fail at market timing.

So why do individual investors, who have fewer resources, experience, time, and higher transaction costs believe that they can win at this game? I think the answer lies partially in the human spirit. People are just optimistic about themselves. Everyone thinks they are more intelligent, more attractive, and better drivers than on average. We are all better than average. In the world of investing, we view our ability to select investments as superior to the average as well. Additionally, investors may feel social pressure from friends, family, and colleagues to try market timing. Hearing success stories from these people increases our optimism that we can do it too. Beware: These people probably only talk about their successes, and not about their failures. This makes it seem that they are successful overall, but are probably not. Chapter 10, “The Social Investor,” discusses the social aspects of investing.


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