The Difficulties of Trying to Time the Market

When cryptocurrency prices began to skyrocket in November of 2021, you probably had a gnawing thought that you should have bought at least some bitcoin. Flash forward to May of 2022, those thoughts surely would have dissipated as the cryptocurrency market crashed and is still yet to fully recover. 

Cryptocurrency is the most volatile example of market timing, but it exemplifies the idea that the timing of your investments can have a drastic impact on the long-term growth of your portfolio. As you begin to formulate your long-term portfolio for goals such as retirement you probably get that same gnawing thought about when the best time to invest in the market is. 

The simple answer? Invest immediately. That may seem like an outlandish statement to make without knowing the specific details of an individual’s situation, but it is rooted in long term studies and data aimed at this exact topic. So, let’s get into why market timing is less about finding the right time and more about the goals that you’re invested for in the first place. 

The Unpredictable Market

The basic dilemma of market timing is although markets move in cycles that can indicate the type of situation a given investment is experiencing, it does not always mean that the market will behave as predicted. 

Identifying the type of cycle an investment is in will come down to the goals of the investor. For example, a day trader will not look at long term market cycles but instead look at blocks of hours or minutes to analyze stock behavior. 

This article is mainly focusing on the long-term and will likely include your retirement savings rather than any savings, checking, or emergency funds you need in more liquid form. 

Some cautious investors try their luck by enacting a strategy which pulls nearly all their money out of the market when they feel it is going to do bad, and the opposite when the sense high returns are upcoming. The proven method is to make investment decisions that support the goals of your investment and employ investment management professionals who will understand your goals and proactively oversee your capital.

There are a variety of different strategies with various levels of efficacy. In 2021 Charles Schwab researched various investment strategies to try and answer the age-old question, “Which strategy reaps the most profit?”

The study involved five main strategies:

  • Perfect market timing, $2,000 invested once a year at the lowest point
  • $2,000 investment once per year on the first trading day
  • $2,000 divided into 12 sections and invested at the beginning of each month
  • $2,000 invested once a year at the highest point
  • No investments, $2,000 left liquid

The results of the study found that the first option, perfect market timing, would experience the most gains. However, the idea of investing a lump sum into the market on the best day of the year is impossible without knowing the future. Note that this study was not done by actually investing $2,000, but $2,000 was analyzed based on historical data from past market years. 

The second-best option which experienced gains was the second choice, investing on the first day of trading. In order of most profit to least, the remaining strategies were investing at the beginning of the month, followed by investing no money at all, and finally the worst strategy is to invest on the best days of the year. 

This study shows the importance of simply having money in investments can lead to good market timing. The reason may not be as it seems as most of the gains on an investment can be traced back to a handful of high growth days. 

Volatility Can Go Both Ways

Retirement savings in the modern era need to stretch much further than in the past. People are living longer, doing more things and healthcare is costly. Long term investments are the most effective way to prepare for retirement which can last for two, sometimes three decades now. 

Long term investment means keeping up with inflation and taxation over multiple years or decades of time. The best way to accomplish this is to create and enact proven investment strategies aimed at creating the appropriate asset allocation for your specific situation. 

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Having the right strategy does not mean the strategy never changes, but it does mean you have better chances if you stick with your plan even in less-than-ideal market cycles. 

Here’s why, explains this Bloomberg study. 

Consider an investment of $10,000 into the S&P 500 made on January 1, 1980. If the investment remained untouched all the way until June 30, 2022, that investment would be worth $1,058,002. 

Now take that same investment and eliminate the gains from the 5 best days during that 42-year period. The investment would be valued at $655,981 without those days. Without the best 10 days, the investment would dwindle to $472,481 after 42 years. 

Take it one step further and eliminate the best 30 days, an investment that could have been worth over a million dollars would be worth only $171,261 after over 40 years!

This exemplifies the importance of having the right portfolio active, even when the market seems it is in a downswing. Most people will only worry about losing tons of money in a short period, but the market can also experience the opposite. Just a few great days can mean the difference in hundreds of thousands of dollars in the long run. 

The Market is Resilient

Throughout its history, the U.S. stock market has been resilient and overcome many events many thought would cripple the economy for decades. The 2008 financial crisis, the great depression, and more recently a global pandemic have all had negative effects on the market, but it has always bounced back.

It’s normal to feel a little anxious about having your retirement funds invested during harsh economic time periods, but historical data exemplifies that staying consistent matters. Even when the market is down, you are most likely better off weathering the storm rather than attempting to predict when the market is at its lowest to invest. 


Whether it is political, economic, environmental, or global factors affecting the market, the stock market will always be an unpredictable machine capable of creating vast wealth, but also capable of crippling an individual’s finances. With the proper planning, a portfolio and investment strategy can be tailored to an individual’s current situation to create a diverse portfolio capable of withstanding low times and benefiting from the positive times.

Additional Resources

Fragasso Financial Advisors, Pittsburgh financial advisors, has been providing high-net worth individuals, families, businesses and institutions with financial advice for decades. Their financial advisors welcome a conversation regarding the goals described in this article, and more. 

Investment advice offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.

Disclaimer: This content does not necessarily represent the views of IWB.


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