Is it possible to time the stock market?

Timing the stock market is almost always a bad idea. Even the so-called experts cannot give reliable predictions regarding the direction of the market. You are much better off investing with a long-term perspective, rather than trying to time the inevitable ups and downs of the market.

Investing automatically in a diversified mix of investments eliminates the need to time the market. The dollar cost averaging strategy also helps you avoid trying to time the market. You invest at regular intervals instead of investing all of your money at one time.

Which is better - active or passive investing?

You’ll find proponents of active investing, passive investing or some combination of the two. Active investors pick and choose investments as economic conditions change. Passive investors gravitate toward investments that mirror the performance of the market or some investment index. Active investors believe that you settle for mediocre results if your only goal is to keep pace with the market.

In general, active investors buy and sell investments frequently. Passive investors tend to buy and hold investments.

Depending upon your preference, you can choose between actively managed mutual funds and passive investments like index funds and exchange-traded funds (ETFs). The professionals who run actively-managed funds buy and sell investments they think will outgain the market. That doesn’t always happen and sometimes they do worse.

Passive investments tend to have lower expenses, since fewer trades are made. Fewer trades mean you’re less likely to owe taxes on your capital gains.