In the world of casinos, there are quite a few bets that would be considered a “sucker bet” -a bet that seems like a good idea with enticing odds that almost never works out. In the world of investing, one of the all-time sucker bets is market timing. On the surface, market timing seems like a pretty easy thing to do. In reality, it is nearly impossible, and the odds of losing money are nearly certain. Why then do we constantly try to place sucker bets when it be casinos or investing? Marketing and media coverage is certainly one of the primary drivers. At the casinos, my wife is immediately drawn to the “Wheel of Fortune” slots. Yes, she knows slots are one of the classic sucker bets in a casino, but whether it’s the flashing lights or simply the lure of a big jackpot, she plays them every time we go. The odds are surely not in her favor vs. other casino games, but the temptation is just too great for her.
Market timing is so dangerous because, honestly, it just seems pretty easy to do. I hear on a weekly basis, clients try to rationalize why they want to wait to get into the markets or why they think this year is going to be bad, good, etc. They rationalize that sitting in cash for a while can’t hurt because “at least I won’t lose any money”. The reality is, yes, you are losing money by sitting in cash. In periods of higher inflation, you are losing the inflation rate minus the small amount you are being credited in your cash account. When economic news is virtually all bad, and remember that “bad news sells” in terms of viewership or readership, then suddenly everyone becomes a market or economic expert.
So what’s the big deal? If I’m wrong, and I get into the market a little later than everyone else or I come in and out a few times, at least I can sleep at night, right? Well, let’s look at what a big deal it really is, and maybe you’ll be losing more sleep than you thought. Here is what the real data tells us.
If you invested $100,000 in the S&P 500 on January 1, 1995, and left it there through January 1, 2026, you would have the following compound annual growth rates*:
- Stayed invested = 10-11%
- Missed the best 10 days = 6.3%
- Missed the best 20 days = 2.8%-4.5%
- Missed the best 50 days = -0.6%
That’s a 10% per year return difference for only missing 50 days. Do you honestly believe you know which 50 days out of the next 30+ years are going to be the best ones? When you put the data on paper, it seems ridiculous that anyone would even try to time the market, yet it’s a conversation we have all the time with clients. Missing the best 50 days, assuming you started with $100,000, could result in a final portfolio value substantially lower than the original investment. I often joke with clients that while fees are very important, I’d much rather pay a small fee than lose out on potential earnings. Always make sure you’re focusing on the big picture.
Turn off the noise, stop trying to guess when a good or bad time is to invest, and simply invest your money in low-cost, well-diversified portfolios and leave it alone. The market will do all the work for you and save you from making yet another sucker bet.
Frequently Asked Questions About Timing the Market
1. What does “market timing” mean?
Market timing is the attempt to predict when to buy or sell investments based on where you think the market is heading. While it may sound simple, consistently getting it right is extremely difficult—even for professionals.
2. Why is market timing considered risky?
Because it’s nearly impossible to predict short-term market movements. Missing just a few key days in the market can significantly reduce long-term returns, making timing strategies more harmful than helpful.
3. What happens if I sit in cash and wait for the “right time”?
You may avoid short-term losses, but you’re still losing money to inflation. Over time, cash can lose purchasing power, meaning your money isn’t working for you the way it could be if invested.
4. What’s a better strategy than trying to time the market?
Focus on long-term investing. Time in the market can be more powerful than trying to time the market.
- Stay consistently invested
- Use diversified portfolios
- Keep costs low
- Ignore short-term noise