What is Chasing the Market?
The concept of chasing the market can be viewed as a reactive approach to investing, rather than a proactive strategy. Chasing the market involves making investment decisions based on recent events within the market, rather than on forecasts about how the market will look in the short term. Choosing to go with the approach tends to minimize the opportunity for realizing the best possible return on the investments, since the investor is always lagging behind the market in his or her activity. When an investor is understood to be chasing the market, two factors are almost always involved. First, securities are not purchased until the rise in value has already begun. What this means for the investor is that he or she misses the chance to purchase the security at a lower price per share. Buying after a rise instead of before means lost revenue for the investor. The amount of return that can have been realized from the investment is diminished accordingly, and can never be recovered. Second
