Why Trying To Time The Market Is A Terrible Idea – In One Very Simple Chart

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trying to time the market

“Time in the market is better than trying to time the market” – a million people at this point. And all of them are probably wealthy.

Why does the quote above about consistently investing make so much sense? Because chances are, most people are not going to be able to time the market perfectly to their advantage. And because entire years (yes, years) could be made in a handful of green days.

This tweet from @Budgetdog on twitter is a shining example of why you should invest consistently and let the market do what the market always does. If, by some wild chance, you were to time it perfectly of course you could make a killing, but that is a one in a million shot. Just look at what you miss out on by trying to time it.

Do you see that? In 40 years, missing the top 50 days would cost you over $300,000 in gains. Wow.

Of course markets are volatile: one day you’re up 3% the next day you’re down 2%. But trying to time the market, in 99.9999% of cases, will only end up forcing you to miss out on those really big days.

Even when there is a market correction, keep buying on the way down and on the way back up. It’s ok to change your holdings and your investment strategy, but don’t stop investing because you are waiting for a crash that may never happen.

So if you invest $2000 every month into an index fund (say VTI), then keep doing that. No matter if the market is up or down. Because since the advent of the stock market, it historically always goes up. And as you can see from the chart above, trying to time it is a very costly game.

Author
C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.