• Jeff

Your Continuing Education -- Market Timing is Silly



Lots of stuff happening in the universe right now.  Lucky for you, I'm going to avoid commenting on anything related to the NFL, standing or kneeling, and judging the overall patriotism of certain individuals.  You should be able to find that stuff on your own.


Market Timing Still Doesn't Work



In today's issue of Your Continuing Education, we focus on why market timing is nearly impossible and, more importantly, not worth the hassle.


I think one of the most misunderstood concepts in investing between investment professionals and the average investor is that most professionals have an absolute understanding that markets cannot be timed with any reliable process.  The average investor, for some reason, thinks it can.


In this age of the internet, information is literally everywhere. As an investment manager, not only does your opinion and analysis have to be right on the timing of an investment, but it has to be different than the prevailing opinion of the market.  It's nearly impossible to be right and be different with any sort of repeatable process.


If you invested at the very top of the market in 2007 and somehow proceeded to stay invested during the blood bath of the financial crisis (i.e., the worst timing to invest in recent history)...guess what? As of today, you would have doubled your money, with an average annual return of just over 7% for the last 10 years despite the historical collapse of the market.  


Here's Michael Batnick from Ritholtz Wealth Management writing about what normal investors should do when the market hits an all-time high:


New Market Highs Should be Bought, not Sold


...and here is another great piece from the Ritholtz team (this time Ben Carlson) on the social proof that investors are constantly striving for when they look at the market returns.


Social Proof in the Markets


This is so incredibly important because I think it's the biggest chasm between people becoming successful investors and failing miserably.


If you're sitting on the sidelines looking for the "right time" to start investing, the old Teddy Roosevelt quote, paraphrased, says that the worst thing you can do right now when it comes to your investments is nothing.


In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing. ~Theodore Roosevelt



The Right Time to Invest is Yesterday


The only timing I'm interested in is getting invested as quickly as possible. I want my investments working as long as they possibly can, and I'm not going to weigh different options of when the ideal time to start is.


Here is a page from Charles Schwab that illustrates the difference in returns for those that time the market perfectly, those that time it perfectly wrong, and those that never get started.  Even investing in the markets at the very top of the market (i.e. the worst possible time) gets you better results over the long-term (a 20-year period) than staying in cash.


Charles Schwab on Timing the Market


The biggest enemy for any of us when investing is ourselves.  Our constant desire to be right, or more appropriately, our palpable fear of being wrong, creates the worst possible backdrop to make important decisions about our investments.


The biggest asset you have is time.  Stop trying to be perfect, talk to a financial advisor, and start letting time and compound interest be your friend.


Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.


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The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Columbine Wealth Planning, LLC (referred to as "CWP") disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement and suitability for a particular purpose. CWP does not warrant that the information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice,  as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall CWP be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if CWP or a CWP authorized representative has been advised of the possibility of such damages. In no event shall Columbine Wealth Planning, LLC have any liability to you for damages, losses and causes of action for accessing this site. Information on this website should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.