Quick Guide: Why Time in the Market Beats Timing the Market

Have you ever heard of the saying, “time in the market beats timing the market?” It’s a bit of a tongue twister, but it does hold truth. Sometimes, success in the market doesn’t inherently mean investing at the “right” time. The “right” time is incredibly subjective and can look different to different people. And, if you are constantly waiting for that “right” time to come along, you just might never find it.

Consistently staying committed to your long-term investment strategy is more effective for building wealth than trying to predict the perfect times to invest or sell in different securities. It emphasizes on:

• Long-Term Growth: Markets tend to grow over time despite short-term fluctuations. Staying invested allows you to benefit from compounding and recover from temporary downturns.

• Timing Risks: Trying to predict market highs and lows is extremely difficult and often leads to missed opportunities for growth.

• Patience Pays Off: The longer you stay in the market, the more likely you are to ride out the downtimes and achieve steady returns.

The Risks of Trying to Time the Market

When it comes to your retirement savings, attempting to time the market can lead to:

• Missed Growth: The best-performing days in the market often come unexpectedly. If your money isn’t invested during these periods, you could lose out on critical gains.

• Emotional Investing: Fear of losses and a yearning for gains can often lead to impulsive decisions, which can hurt your long-term goals.

• Unpredictable Outcomes: Even seasoned investors rarely succeed at timing the market consistently.

Why Time in the Market is Key for Retirement

Focusing on staying invested for the long-term allows you to:

• Let Your Money Grow Over Time: Over time, your investment returns can generate their own returns, helping your savings grow exponentially.

• Stay Steady Through Market Ups and Downs: While short-term dips can be unsettling, the market historically trends upward over decades, benefiting those who stay patient with their investments.

• Align with Your Retirement Goals: A steady, long-term strategy is better suited to the timeline of retirement planning.

For a better perspective, let’s give a short example. If you invested money in the market for 20 years but missed the 10 best-performing days, your retirement savings could be significantly lower than if you had stayed fully invested. These best-performing days often occur during periods of high volatility, when it’s tempting to pull out of the market. However, staying invested can help your money benefit from those critical growth moments. For retirement savers, staying the course is vital to maximizing your nest egg.

What This Means for Your Retirement Plan

• Start Early: The earlier you begin investing in your retirement account, the more time your money has to grow.

• Contribute Consistently: Regular contributions, even during market downturns, help you take advantage of long-term growth.

• Stay Focused on the Long-Term: Remember, retirement is decades away for many savers—if you have the time to save, why not make the most of it?

Key Takeaway

Your retirement depends on how long your money works for you, not how well you predict the market. By committing to a long-term investment strategy and focusing on the power of time in the market, you’ll have a better chance of being prepared to enjoy the retirement you’ve worked so hard to achieve.

If you’d like to learn more about investment strategies and what those could look like for you, we’re here to help—schedule a meeting with one of our RetireAdvisers℠ consultants today.

The concepts expressed herein represent the views and opinions of Pension Consultants, Inc., and are not intended as legal, tax, or investment advice for any specific individual, account, or plan.