Time in the Market, Not Timing the Market
The headlines can keep you up at night.
The market just had a bad week. Or a bad month. Or maybe a bad year. Pundits on TV are predicting a crash. Your neighbor swears he’s pulling everything out and waiting until “things calm down.”
And there you are, watching your account balance shrink.
You wonder, Should I get out now and jump back in when things look better?
It’s tempting.
It’s also one of the most expensive mistakes an investor can make.
Decades of research point to the same conclusion: When it comes to building wealth, what matters most isn’t your ability to time the market. It’s your willingness to stay in it.
Why timing the market sounds so appealing
In theory, market timing is simple. You sell when the market is high. You buy when it’s low, and pocket the difference.
In practice? Market timing almost never works.
To time the market successfully, you have to be right twice – once when you sell, and again when you buy back in. Get either decision wrong, and you can do real damage to your long-term returns.
The cost of missing just a few good days
Studies of long-term market data tell a striking story. An investor who stayed fully invested in the S&P 500 over the past several decades earned dramatically more than one who missed just the 10 best days during that period.
Miss the 20 best days, and the gap widens further. Miss the 30 best days, and your returns shrink to a fraction of what they could have been.
The fact is that the market’s “best days” are nearly impossible to predict. They tend to cluster around the most volatile, scary moments – exactly when nervous investors are most tempted to sell.
The bottom line
You don’t need to be able to “time the market” to build wealth. Instead, you need patience, discipline, and a plan that lets you stay invested when others panic.
At Meriwether, we help clients build and implement investment strategies designed for the long haul. We coach them through volatile markets, remind them of their goals, and help them avoid the costly mistakes that come from reacting emotionally.
We do this because we believe successful investing is less about being clever and more about being consistent.
If you’re feeling tempted to make a big move based on what the market is doing right now, let’s talk first.
A good plan is worth far more than a good guess.
Sources: 3 reasons to stay invested right now. https://www.fidelity.com/learning-center/wealth-management-insights/3-reasons-to-stay-invested
This content is for educational purposes only and should not be considered personalized financial advice. Please consult with a qualified financial professional to discuss your specific situation and needs.