About Timing the Market
A Note Before We Dive In:
This blog post originally came out in March of 2020, during the early days of the coronavirus pandemic. At the time, we were all trying to make sense of dramatic market swings—and the temptation to time the market was real.
While the headlines have changed, the market’s unpredictability hasn’t. Fast forward to today, and we’ve seen plenty of fresh waves of volatility—this time fueled by things like the ongoing tariff wars, geopolitical tensions, and policy uncertainty. But here’s the thing: the core principles we shared back then still hold true.
In this updated version of the original blog, we’ll revisit the timeless question: “What should I do about the volatility in the markets?” This post focuses on a common urge—timing the market—and why it rarely works out the way we hope.
So, whether you're navigating headlines from 2020 or today, read on: About Timing the Markets.
It’s been quite a few weeks for the markets – you might have gotten whiplash from trying to keep up with the latest drops and rebounds…and drops…and rebounds. Things change very quickly – so we are bringing you a quick, three-part series to help you answer “What should I do about the volatility in the markets?”
I have heard from several of you over the past few weeks with similar stories. Each of you has a fill-in-the-blank – friend, co-worker, or family member who told you a story like:
I knew the markets were going to drop as soon as 2019 ended – there was no way this momentum could keep up, so I sold everything in January.
I knew the markets were going to drop as soon as the first coronavirus case occurred outside of China – I KNEW it was going to be bad, so I sold everything LITERALLY the day before it started dropping.
Each of my friends or clients calling me felt like they had missed an opportunity to get out of the markets and preserve some of their investments. And, it’s really, really, easy to feel this way when you’re hearing one or more stories like the ones above.
Here’s the deal: no one can actually *consistently* predict when the markets are going to peak and valley. Not even the super-confident sounding pundits on television. Not even people who have studied the markets for years. Not even the smartest finance professor at Harvard Business School.
And I emphasize consistently – someone might get lucky once or twice (and the rest of us will definitely hear about it when they do!) but over time, those who enter and leave the market lose out on some big potential gains for their long-term investment portfolios.*
I’m going to use three fictitious people as examples: Quick Buck Chuck , Able Mable, and Steady Eddie. If you get our email “Money Mondays,” you might recognize this scenario (and if you’d like to stay in-the-know with tips and tricks like this, be sure to get on our email list “Money Mondays” at the link below).
Quick Buck Chuck: Quick Buck Chuck invested $100,000 in July 2008 in an index fund mirroring the S&P 500. He hated watching his balance go down on his hard-earned money the next year, so he sold in March 2009. When he sold, he was left with $63,000. He has been too trigger-shy to get back in the market, so he still has $61,237. Due to inflation, his lump sum has less purchasing power now than it did back in 2009 (he would need about $91,940 to keep up with inflation according to this inflation calculator - this figure has been updated to reflect inflation through 2025).
Able Mable: Able Mable also invested $100,000 in 2008 and pulled the money out in 2009. When she sold, she had $63,000 left. She waited until the market recovered and reinvested the $63,000 in December of 2013. Able watched her money grow, but when the correction in 2018 occurred, she pulled her money out again, thinking the market was at a peak. When she pulled the money out in December 2018, she had $91,640.43. She has kept it in cash since then.
Steady Eddie: Steady Eddie invested $100,000 in 2008 in an index fund that mirrored the S&P500, right before the market crash. He watched it drop in 2008 (he bit his nails, too), then rebound in 2009. He then decided to largely ignore what was happening since he had years until retirement. His initial investment could be worth around $572,267 in 2025 (according to this calculator and assuming all dividends were reinvested).
Steady Eddie comes out ahead!
Steady Eddie has about almost TEN TIMES the assets of Quick Buck Chuck and almost SIX TIMES the assets of Able Mable. This example uses simple assumptions to make the clear point: if you had simply held onto your investments since 2008, you are much better off than if you’d tried to guess when things would go up and down.
Declines in bull markets are swift, sudden, and vicious. When they are over, there is typically a series of VERY quick rebound days. If you blink, you could miss it. So, for those who got lucky and pulled their money out at the peak, they now have a big task in front of them – perfectly timing, once again, when to put their money back in the market. They have to get lucky twice just to end up where you most likely will be in the future if you stay the course.
So, if you were feeling like you missed an opportunity to pull your money out of the market, you can sleep better at night knowing the data from past shows simply holding onto your investments will most likely work out better for you in the long run.
*Disclaimer: This is for informational and educational purposes only. It is not intended to constitute investment, legal, tax, or financial advice. The model does not provide specific recommendations for any individual and should not be relied upon as the sole basis for making investment decisions. Past performance is not indicative of future results. The projections and calculations presented in this model are based on certain assumptions, which may not materialize. Actual investment results may vary significantly from those illustrated.Investing in securities involves risks, including the potential loss of principal. The model does not consider individual risk tolerance, financial situation, or investment objectives. Participants should assess their own financial circumstances before making any investment decisions.
