Don’t Try to Time the Market

Don’t Try to Time the Market

Right now the stock market is at all time highs. In fact, it has been going gangbusters really for the past year or so. Certainly, some of the market rise is the economy continues to chug along, but we don’t have record growth or anything. We do have good corporate earnings so that contributes to it. But some people are asking what is making this market continue to go higher at the clip that it is at? And is the market too high? Should I wait? What is I lose my money in doing so?

All of those are legitimate questions and their are illustrations out there that can give people some pause. For example, take a look at the cryptocurrency markets.

Bitcoin, just over a month or so ago hit an all time high of $20,000, now it is trading at $11,000. That is a drop of 45% in a month. And it isn’t just Bitcoin it is all kinds of other currencies.

So when people see what is happening in cryptocurrency they might have some trepidation in investing in the stock market because of the continued highs they have and the record valuations for stocks.

I can understand their trepidation. I believe that we will have a pull back. A significant one in the near future. In fact, I would suggest a recession might happen within the next 18 months or so. So what does that mean for my investing?


I repeat. NOTHING!

If you invest in the stock market now, just keep on investing.

Don’t TIME the market.

And the reason for that is no one has a crystal ball.

Here is an example. If you had stayed fully invested in the stock market from 1993 to 2013 your annualized return was 9.2%. If you had missed the top 10 best days in the market your return would have been 5.4%. That is a HUGE difference over the course of 20 years.

I mean we are talking tens, if not hundreds of thousands of dollars.

Because we don’t have a crystal ball. Because we don’t know when they best days will be then it is best that you just keep putting money in.

Don’t time the market. Just go with it.

What If I Lose Money?

Certainly, the biggest fear for some people is that they will lose their money. In particular, those who join the party late. They want to invest into the market, but they think it is too late.

My dad is a perfect example.

My dad has been out of the stock market for almost 4 years because he wanted to keep his money “safe.” And in doing so he has probably lost out on over $100k in growth. He laments his decision, but is reluctant to get back in because he fears he will lose his money.

That is certainly a possibility. And my answer to him was (and he doesn’t take his son’s advice) is WHO CARES?

The reason I say that is because he will get that money back as long as he doesn’t touch it. It will come back. If you are invested for the LONG-TERM and by long-term I mean at least 5-10 years or more than your chances are pretty good that it will come back.

In over 140 years the stock market has ALWAYS come back.

That is why you shouldn’t try to time the market. Don’t try to jump in and out because you don’t know when it will go up or down.

I know the market will go down again. I know it will go down SIGNIFICANTLY. Probably at least 20% or more. And it will do that multiple times in my lifetime. However, my risk tolerance is fairly high, particularly after living through 2008 when I was tempted to pull things out, but I didn’t. I let it stay there and it has certainly benefited me up to this point.

If you are going to invest in the stock market DON’T try to time the market. Even if we have hit record highs. In 20 years from now I am sure we will be at more record highs than we have now.

If you are investing in the stock market keep investing. If you aren’t invested in the market and are afraid of losing money then start slow, but don’t time the market.

Now if you are someone who checks the stock market everyday and afraid to lose everything then you probably shouldn’t invest in it in general. There are other ways for people to make money (e.g. real estate, bonds, peer to peer lending, etc). Rest assured that if you invest that you will suffer some heavy losses. There will be a bear market again (that is a stock market loss of 20%). There will be multiple ones in your lifetime.

If you think you can stomach those things the rewards on the other side can and will be great.

Just DO NOT time the market. Slow and steady wins the race. Just keep putting money into whatever your investments are (I prefer index funds or a target date fund might even be better for you).

Thanks for stopping by y’all!

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