The Cost of Timing the Market

The Cost of Market Timing. A key component of military operations is precision timing. Why not apply that precision timing to our investing? Why not use market timing to earn superior returns?

Unfortunately, there is no proven way to time the market. As shown in Figure 1 below, missing only a few days of strong returns can drastically impact overall performance.

The impact of missing just a few of the market’s best days can be profound, as this look at a hypothetical investment in the stocks that make up the S&P 500 Index shows. Staying

invested and focused on the long term helps to ensure that you’re in position to capture what the market has to offer.

• A hypothetical $1,000 turns into $20,451 from 1990 through 2020.

• Miss the S&P 500’s five best days and the return dwindles to $12,917. Miss the 25 best days and

that’s $4,376.

• There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid

the worst—so history argues for staying put through good times and bad.

Figure 1. The Cost of Market Timing.

See Dimensional Fund Advisor's one-pager for details and disclaimers linked here.

I'm happy to talk this subject over with you on a complimentary call. As a fee-only fiduciary advisor, I never receive commissions and therefore am unbiased on this to

Disclaimer: Past performance is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. Investments in securities involve the risk of loss. Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.