Think: Time in the Market, not Timing the Market
Leading financial advisor Cary Stamp comments briefly on why timing the stock market is so difficult, and why letting assets grow long-term (“time in the market”) is the path to wealth creation.
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Hi, I’m Cary Stamp, and this is a Principled Wealth Moment. I’d like to talk today about the subject of market timing. A lot of people are worried right now. Is the market high? Should I be getting out? Should I sell everything and sit on the sidelines for a little while? The answer is absolutely not. Why? Because that’s only half of the solution.
Let’s say that you’re right. You sell everything out right now. You get out of the market. When do you get back in? You get back in at the bottom, of course. But when is that? Who’s going to ring the bell and tell you this is the bottom of the market? I have seen this for the last 30 years. People think that they are smarter than the market, that they can pick a time when they would get out, and then they’re going to pick the time when they get back in. But all of the research and all of the studies and all of my experience tells me that that’s not how people behave. The worse it gets, the more scared they are when in reality that’s when they should be investing more. When they are more scared is when they should be putting more money into the equity markets.
So, we don’t time the market. Why? 74% of the time, the market goes up in any given year. If you go out to a five year rolling period or a 10 year rolling period, the markets have produced positive return in 90% of the cases. So we don’t try to figure out when it’s high or when it’s low. We try to make certain that we have this: “time in” the market, not “timing” the market.
I started as a financial advisor in 1990. In 1990, there was a big discussion about where the Dow Jones would go and whether it’s going to go back up over 3,000 or it was ever going to get there again. Today, 30 years later, we’re at 24,000, almost 25,000 on the Dow. And what did you have to do over that period of time to make eight times your money? All you had to do was buy good quality equities and hold on to them for the long term. We’ve gone through 9/11. We’ve gone through the 2007 financial crisis. We’ve gone through COVID-19 and many, many other events that are, you know, silly to even mention. Remember the Greek debt crisis? Remember SARS? Remember all of the things that we all thought the market was going to crash for? The market climbs a wall of worry.
What we need to do, take the time in the market and allow that to work for us. Timing the market doesn’t work. Long term investment is the way to go. And if you feel so nervous that you need to sell your portfolio, then you shouldn’t be in equities to begin with. Long term, you’ll make a lot of money. I’m Cary Stamp. This has been a Principled Wealth Moment.