Unfortunately, this strategy is too good to be true for many people. I have yet to see anyone succeed over their lifetime who constantly times the market. Here are a few of the dangers of timing the market: Transaction Costs - If you're trying to time the market, every time you make a trade, it's another fee. One trade in a brokerage account will run you about $10.
If you tried to time the market, you have to buy into the market for $10 and also have to sell out of the market for $10. Adding these fees up for multiple stocks, multiple times, takes a lot away from your overall return. Tax Inefficient - Once you sell a security for more than email list you paid for it, you have a taxable gain. Therefore, if you were to buy and sell the same security multiple times, you would have a taxable gain each time.
Tax Document Overload - As a passive investor, I get little tax documentation at the end of the year. When I was young and over-confident that I can time the market, it was a nightmare at tax time. Sorting through 15 pages of my portfolio summary to get information was no fun at all. It costs me time and money because I had to pay for a tax preparer.