Remember: It’s About Time In The Market (Not Timing The Market)

Remember: It’s About Time In The Market (Not Timing The Market)
Reda Farran, CFA

12 months ago1 min

Mentioned in story

There’s an old adage in the investing world that says “it's not about timing the market, but about time in the market”. Put differently, trying to time the market’s ups and downs is notoriously difficult – if not impossible. It can also be very costly: behavioral impulses unfortunately tend to push investors to buy high and sell low. So you’re much better off investing and staying invested over the long run with a well-diversified portfolio that’ll reap the benefits of compound interest, which Albert Einstein called the eighth wonder of the world.

What’s more, by constantly remaining invested, you guarantee that you don’t miss out on the market’s biggest “up” days. And that’s a lot more impactful than you might think. As you can see from the chart, investors who were absent for the S&P 500’s ten best days in the two decades through 2022 saw less than half the gains of those who were in the market for the whole time. And those who missed the index’s 20 best days saw less than a third of the returns of those who had just remained invested.

So, while today’s market environment is full of worries – inflation, interest rate hikes, bank troubles, and recession risks, to name a few – you’d be wise to keep that adage in mind. It’s a reminder that if you’ve got a portfolio that’s well-diversified and can handle extreme scenarios, you can ignore most of the market noise and simply remain invested. It’s the best way to make sure you don’t miss out on the market’s next big rally – whenever that finally arrives…

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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