I don’t think “market timing” is a good investment strategy — in fact, it’s not a strategy at all — but it can be a worthwhile experiment if played with money you don’t mind losing.
One way to time the market is to buy low-cost exchange-traded funds (ETFs). These investments act as mutual funds — a portfolio of a number of stocks — that can be purchased through the stock market like any other stock. Using ETFs rather than individual stocks for market timing allows the investor to mitigate the risk of investing in just one company. Powershares Dynamic Banking (PJB) is one such ETF, designed to track the retail banking industry.
Are banks ready for a rebound? PJB is down 23% over the past 12 months. If it’s the right time, banking stocks might be able to provide not only a short-term gain, but a long-term gain if the market believes that this sector is deeply discounted due to all the various market conditions that have affected banks over the past year.
Some experts are saying that now is a good time to buy into the banking sector, but others believe that there will be more bad news ahead, trending stock prices further downward.
I’m investing for the long-term, but I wouldn’t mind finding bargains that might provide a significant increase over the next few years. Is banking the right industry for a fast recovery, and is now the right time?