Time, Not Timing, Is the Key to Long-term Success

It’s not getting in and out of the market — it’s adhering to a sensible investment strategy over time

When the markets undergo stress, some investors worry that their net worth is diminishing permanently. Sometimes, these folks panic, selling at or near a market bottom, and then wait too long to get back in once the market recovers. This becomes a danger during larger-than-typical market declines, when some investors make decisions based more on emotion than logic.

History has shown that financial markets recover after even steep declines; it’s just a question of time. A mountain of evidence also shows that no one can predict the future, including the direction of the stock market. There’s little use in trying to base your investment plans and decisions on the predictions of others.

Indeed, you can lose more money by trying to time the market. This is mostly because market timing involves two decisions: knowing when to get out, and knowing when to get back in. Getting both decisions right is devilishly difficult, even for professional investors. In addition, selling at the wrong time locks in actual losses, while staying invested only incurs losses on paper — they don’t really affect you until you sell.

 Be a “Steady Eddy”

Instead of trying to time the market, you should establish a solid, long-term investment plan and stick to it. Contributing to your retirement plan each month imposes a certain discipline that has the potential to make you more money over time.¹ This is because your regular investment buys fewer shares of a fund when prices are high, but more shares when prices are low. The result? A lower average cost per share that can result in more money to spend in retirement.