Time in the Market vs. Timing the Market

Time in the market vs. timing the market, what does this mean?

One of the most common questions I hear as a financial advisor is: “Should I wait for the right time to invest?” or "When is the best time for me to invest a lump sum?"

It’s an extremely common question and one I keep coming across—we all want to buy low and sell high. But history and research tells us that long-term success in investing comes less from timing the market and more from time in the market. This means history has shown staying invested and staying in the market has outperformed attempting to try jumping in and out and finding the 'best day' to invest (timing the market).

Here’s why:

1. The Market’s are Extremely Unpredictable

Markets often rise suddenly, and those big “up” days contribute heavily to long-term returns. If you miss just a handful of the best-performing days by sitting on the sidelines, your portfolio’s growth can be cut dramatically. The problem? No one knows when those days will come. This can be based off of news, media as well as other factors that you can't always plan for.

2. Emotional Investing can be Dangerous

Trying to time the market often leads to buying when confidence is high (prices are higher) and selling when fearful and nervous (prices are lower). Staying invested through ups and downs avoids costly emotional decisions and allows you to potentially benefit from those down swings.

3. Compounding Rewards Patience

The longer your money is invested, the more time it has to compound. Even modest annual returns can grow substantially over decades. Pulling out of the market interrupts that compounding effect.

4. Market Volatility is Normal—and Historically has Been Temporary

Short-term drops happen regularly, but historically, markets trend upward over time. By remaining invested, you give yourself the chance to recover from downturns and benefit from long-term growth.

Key Takeaway

Rather than trying to predict the perfect entry and exit points, the most reliable strategy is to stay invested, remain disciplined, and let time do the heavy lifting.

The charts below show the importance of staying invested and how corrections are historically a very normal part of the market cycle. 

If you have any questions or would like to discuss your portfolio and investments further please don't hesitate to reach out!

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Alison Cannell, for the benefit of Alison Cannell, Financial Advisor with Cannell Wealth Management Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the Fund Fact sheet or prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.