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What a market! Amid increasingly unpredictable and erratic US policymaking – as well as weak economic growth here in the UK – it has been a volatile few days for investors. My initial instinct is to continue looking for bargain FTSE 100 shares to add to my portfolio.
But might I do better just to forget about the stock market, enjoy the coming summer away from it, and come back later in the year when the geopolitical situation could be calmer?
Market timing can be hazardous
That could potentially save me from some value traps. After all, quite a few FTSE 100 shares look temptingly cheap to me right now – but whether that in fact turns out to be the case will be clearer a few months from now.
But there is a risk here. Many people try to time the market. However, a number of academic studies have shown that being out of the market even for a short time can risk significantly affecting long-term returns.
That is because those returns are disproportionately affected by a small number of trading periods.
So, sitting out of the market for coming months could potentially save me from some value traps. On the other hand, it might mean I miss out on some brilliant investing opportunities.
I’m on the hunt for bargains!
Take JD Sports (LSE: JD) as an example.
One way to look at the FTSE 100 retailer’s share price – down 21% since the turn of the year – is as a warning signal.
Snarled global supply chains could add costs to the multinational sportswear seller. On the demand side, consumers are increasingly squeezed and that could mean they are less willing to splash the cash on new trainers or workout gear.
If such a view turns out to be correct, my best move might be to cut my losses and dump my JD Sports stock.
But there is an alternative way to look at things: JD Sports looks like a potential bargain for a long-term investor and is therefore worth considering right now.
In fact, that is how I see things.
Why? JD Sports has a massive global network of branches as well as a big digital presence. It has spent years investing heavily in making its brand desirable for its target customers. It also has deep relationships with suppliers, especially Nike.
Right now, those strengths do not seem to be helping it much in the stock market. That is not surprising in a way: Nike itself is down 15% since the turn of the year.
But over time, I think JD Sports’ strengths will hopefully shine through. That may take years, but long-term investing takes patience.
Frankly, I am sorely tempted to buy more JD Sports shares at what I see as a bargain price. But it is already my largest position. In order to keep my portfolio sufficiently diversified, I will not be adding to my existing holding.
Fortunately, though, I see lots of other potential bargains in the FTSE 100 – and who knows whether they will be as cheap next week, let alone after summer?
