What Happens When You Fail at Market Timing

The impact of being out of the market for just a short period of time can be profound, as shown by this hypothetical investment in the stocks that make up the Russell 3000 Index, a broad US stock market benchmark.

A hypothetical $1,000 investment made in 1998 turns into $6,356 for the 25-year period ending December 31, 2022. Over that same period, if you miss the Russell 3000’s best week, which ended November 28, 2008, the value shrinks to $5,304. Miss the three best months, which ended June 22, 2020, and the total return dwindles to $4,480.

There’s no proven way to time the market—targeting the best days or moving to the sidelines to avoid the worst—so the evidence suggests staying put through good times and bad. Missing only a brief period of strong returns can drastically impact overall performance. We believe that investing for the long term helps ensure that you’re in position to capture what the market has to offer.

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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.