Broker Check

Timing the Markets

| September 20, 2022

Traffic jams are unwelcome nuisances.  Unless we know the cause and what every other driver on the road is going to do at any given time (which is of course impossible), we can’t know the right route to get to our destination quickly and safely. 

Still, you often see impatient drivers who think they can pick the perfect lane that will shave a second or two off of their commute, often only to be delayed even longer.  This can serve as a metaphor for investors who try to time exposure to the stock market. 

At this point, there’s no compelling or time-proven approach to time the market with consistent success, yet it’s a question we’re often asked as financial professionals: “Is now a good time to get out of (or in to) the market?”

Much like the traffic jam illustration, attempting to time moving in and out of the market can result in less desirable outcomes.  Take the chart below from JPMorgan.  During the period from January 2002 to January 2022, an investor missing the best 10 days in the stock market while trying to pick and choose when to be invested, could have resulted in a return more than 40% worse than if they had just stayed invested for the entire month.  

One of the main reasons for this is that seven of the ten best days in S&P 500 total return index occurred within fifteen days of the ten worst days over the same time period.  Long story short:  predicting the future is next to impossible.

That said, staying invested is not always easy either.  Riding the rollercoaster of ups and downs may cause some fear and worry to creep in.  After all, you’ve worked hard to save your money and you’re relying on your investments to help fund your retirement. 

That’s where we as financial advisors earn our stripes.  One of the biggest roles a financial professional can play is helping you see the big picture through the noise of all the negative (and sometimes positive) news.  Experienced advisors help you put focus back on to your specific goals and objectives, the timeframe for those plans, and provide a personalized and facts-based rationale to either stay the course or to make a change.

Having trouble staying in your seat?  We’re just a phone call or an email away.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.