What does "market timing" refer to in the context of investing?

Market timing refers to the strategy of attempting to predict future market movements in order to maximize profits by buying assets at a low price and selling them at a high price. This involves analyzing market trends, economic indicators, and other variables to make informed decisions about when to enter or exit a position within the market.

The rationale behind market timing is simple: if an investor can accurately forecast when the market is at a low and is poised to rise, they can purchase assets at that time for maximum future returns. Conversely, if they can predict when the market is about to decline, they can sell their holdings to avoid losses. However, consistently and accurately timing the market can be extremely challenging due to its inherent volatility and unpredictability, which is why many financial experts advocate for a long-term investment approach rather than short-term speculative strategies.