What happens when you fail at market timing

There’s no proven way to time the market. Any attempt to do so is a gamble and forecasts from so-called experts need to be treated with a healthy dose of scepticism.

As the legendary investor, Warren Buffett, once said: “We have long felt that the only value of stock forecasters is to make fortune tellers look good.”

Not only is it difficult to predict the best days in the markets, the cost of missing them is high, as shown by the following hypothetical investment* in the stocks that make up the S&P 500 Index.

  • From 1970 through to the end of August 2019, the hypothetical $1,000 turns into $138,908.
  • However, miss the S&P 500’s five best days and it reduces to $90,171.
  • Miss the 25 best days and the return dwindles to $32,763.

Given that market timing — targeting the best days or moving to the sidelines to avoid the worst — is so hard, what’s the alternative?

History simply argues for staying put through good times and bad as this helps to ensure that you’re in the position to capture what the market has to offer.

It’s an approach that's shared by BRWM and if you’d like to learn more about our philosophy please click here or get in touch.

(* Figures provided by Dimensional Investing)