Tempted to Time the Market? Look at These Charts First

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Matthew Etter, CFP®

Partner, President
Signet Financial Management
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Daniel DiVizio, CFP®, CRC®

Financial Planning Director, Wealth Management
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When stocks plunge, it’s tempting to do something, anything, to regain control of your financial picture. But the odds are that jumping in and out of the market will only hurt your portfolio in the long run.


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For investors watching the latest rout, which put the S&P 500 Index on track Tuesday for its lowest close since November 2020, it’s hard to sit back and watch money disappear. But plenty of research shows that it’s better to stay fully invested than attempt to time the market.

“Market timing is extraordinarily difficult, and lots of money in losses were locked in by those who went to cash in late March 2020, after the market dropped 34% — only to see it return to that level by July,” said Doug Bellfy, a financial planner with Synergy Financial Planning. 

Here are a few charts from leading investment firms that back up the argument against timing the market.

Vanguard: Focus on the Long Run

Sharp downturns in global stock markets are painful, but aren’t really uncommon. Vanguard Group created a chart to show that while some bear markets since 1980 have been deep, many of the recoveries that followed were even greater, and longer.

The average bull market had an average total return of 99% between Jan. 1, 1980 and Dec. 31, 2021, Vanguard found, and lasted an average of 852 days. Average bear markets had returns of -28% and lasted 236 days.

Fidelity: Lost Opportunity Cost

To show the impact of missing out on even a few days worth of recovery in the US stock market, an asset allocation team at Fidelity Investments calculated returns for hypothetical investors who started out with $10,000 and either stayed invested in a portfolio tracking the S&P 500 or missed the best five, 10, 30 or 50 days from Jan. 1, 1980 to June 30, 2022.

The investor who stuck with stocks, with dividends reinvested, wound up with a hypothetical $1.1 million before accounting for taxes or expenses. Investors who missed the best five, 10, 30 and 50 days in the market had returns that were, respectively, 38%, 55%, 84% and 93% lower. 

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Charles Schwab: Timing Hurts

Trying to pick the perfect moment to enter the market can come at a high cost. To show just how much, the Schwab Center for Financial Research created five hypothetical investors who each got $2,000 to invest in the S&P 500 every year from July 2002 to June 2022, but who took very different approaches to putting that money in the market.

The investor with perfect timing invested $2,000 into the S&P 500 at its very lowest point every year, and wound up with $140,214 in 2022. The person who plunked their money into the market on the first trading day of each year was left with $129,865 — 7.4% less than the perfect-timer, but well ahead of hypothetical investors who either split up the money into 12 portions that went into the market at the start of each month, had the bad luck to invest at the market’s peak every year or who left their money in cash.  

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“If shifting everything to cash will reduce your stress level, it might be something you need to do,” Bellfy said. “Unfortunately, the stress of when to get back in may create a new and possibly worse stress.” 

© 2022 Bloomberg L.P.

Matthew Etter profile photo

Matthew Etter, CFP®

Partner, President
Signet Financial Management
Daniel DiVizio profile photo

Daniel DiVizio, CFP®, CRC®

Financial Planning Director, Wealth Management
Contact Now