Does Market Timing Work?

One of our mem­bers sent me this arti­cle by Charles Schwab, “Does Mar­ket Tim­ing Work?”.

They stud­ied the dif­fer­ence between try­ing to time your invest­ments ver­sus just stay­ing ful­ly invest­ed. Their con­clu­sion prob­a­bly won’t sur­prise any lis­ten­ers to our show: 

Our research shows that the cost of wait­ing for the per­fect moment to invest typ­i­cal­ly exceeds the ben­e­fit of even per­fect tim­ing. And because tim­ing the mar­ket per­fect­ly is near­ly impos­si­ble, the best strat­e­gy for most of us is not to try to mar­ket-time at all. Instead, make a plan and invest as soon as pos­si­ble.

Even if you are clever or lucky enough to be “Peter Per­fect, a per­fect mar­ket timer”, this made a “rel­a­tive­ly small dif­fer­ence” com­pared to “Ash­ley Action” who just invest­ed her mon­ey as soon as she had it. 

And, of course, most of us aren’t as clever or as lucky as Peter. 

Which is why we try to stay ful­ly invest­ed.