Time In the Market, Not Timing the Market

Good days and bad days are a fact of life in the market. Sometimes it’s up and we celebrate. But when it dips, we worry…and if it tanks, forget it: the first instinct for most of us is panic, and we wonder if we should just get out of the market and protect what we have left. But history shows us that’s the worst thing we could do. "Time in the market” means relying on a strategy where you don’t try to guess when the market is at its lowest or highest point. The purpose of investing is to establish an investment philosophy, decide on a time horizon, and remain invested in between.

Take a look at the picture below. It discusses how time, not timing, is the best way to capitalize on stock market gains. It offers a vivid illustration of what can happen when you leave the market even for a few days here and there. Notice the sharp differences when one misses even the 10 best days in the market. Your overall return is compromised in these examples. There are several individual investors who have this as their story.

Without a crystal ball, it’s nearly impossible to time the market, and trying to catch a market upswing can actually hurt more than help. It’s tough to stay the course when you’re facing fears of volatility. Reacting to what is going on in the economy, the political space, or even in the news can have detrimental effects on our investment goals. As an example, in March and April of 2020, markets saw tremendous volatility due to the Covid-19 crisis. Those who decided to get out of the markets missed out on the gains that all indices obtained that year. Yes, the market closed 2020 in the positive. Remember, time in the market is your goal; not timing the market.

Here is where it helps to have the perspective of a trusted financial advisor. When the market is moving and you’re feeling concerned, you can connect to discuss what’s happening and what it means. At Kobo Wealth Strategies, we invite clients to revisit the long-term strategies put in place before the emotions set in. That way, you won’t miss out when what went down eventually comes back up. In fact, you may find that the concept of buy low and sell high becomes easier to execute when you have someone you trust to help you sort out the noise.