Investing Strategies: The Market-Timing Myth

Preston Rosamond |

Stock markets are like roller coasters—they’re fun to ride but when you get off, you feel a little unstable and like you want to throw up. That may be a funny analogy, but there is some truth to it! If you have watched the market volatility this past year, chances are you have either considered or attempted to time the market to avoid a loss. Maybe you sold your positions early on and are waiting for the right time to jump back in. Or maybe you’re simply waiting on the perfect time to buy in with the considerable cash assets you have set aside

While it can be tempting to try your hand at timing the market, the truth is it doesn’t work. Ultimately, the best time to invest was yesterday. Here are 3 reasons why market timing is a myth—and what you should do instead.

1. Market Timing Is Consistently Inconsistent

Timing the market usually involves attempting to “buy low and sell high” by analyzing current market trends for inefficiencies or volatility indicators. This strategy may work sometimes, but it is far from perfect. Not only do you have to guess when to buy in, but you also have to guess when to sell. That means for every gain, you have to be right twice to make timing the market worth it. Unfortunately, market bottoms can only be truly spotted in hindsight, and timing the market is often closer to playing the lottery than it is to an educated guess.

2. Timing the Market Is Expensive

Timing the market can also be expensive. Depending on your account type, asset class, and where you are executing your trades, you will likely be charged for every purchase and sale you make, and that’s on top of any taxes owed on gains. The more frequently you trade, the higher your transaction costs will be.

If you held the assets for less than a year, your gain will be taxed as ordinary income at your marginal tax rate, which can be as high as 37% for high-income earners. Long-term gains are taxed at a preferential rate. Regardless of your tax rate, your market timing must still be right more often than not just to cover the cost of your guess. 

3. You Will Miss Out on Compound Growth and Market Rebounds

A recent study by the Schwab Center for Financial Research found that bad market timing is worse than investing immediately, regardless of the market conditions at the time of investing. This indicates that even in market downturns, or just before a downturn, investors who invest immediately and remain invested will be better off than those who stay on the sidelines or attempt to time the market. 

Take a look at Schwab’s graph below, which shows just how much more a fully invested portfolio earns over 19 years. It would earn approximately $14,000 more in growth than a portfolio with bad market timing, and $91,000 more than a portfolio that stays in cash. The only investor who performs better is the one with perfect timing—but since we already know perfect timing is impossible, investing immediately is the next best strategy.

What’s more, over time that extra $14,000 or $91,000 will have the opportunity to grow even more thanks to compounded interest. Even if the market fluctuates in the short term, the odds are high a solid investment strategy will grow over time.

Another graph by Hartford Funds and Morningstar shows what happens if you miss the best days in the market, which often closely follow a major downturn and can be just as difficult to predict. An investor who missed the 10 best days in the market between 1992 and 2021 would have earned 54% less than someone who was fully invested during the same period. 

Someone who missed the 30 best market days would have earned a whopping $172,000 (83%) less than their fully invested counterpart. The research is based on a $10,000 initial investment, but these numbers would be much more dramatic if you were dealing with a $100,000 or even a $1,000,000 portfolio. 

The time value of money tells us a dollar today is worth more than a dollar tomorrow, and this is certainly the case when it comes to investing. The longer you are invested, the more likely you are to ride out the day-to-day market fluctuations and experience growth instead.

Are You Missing Out?

Don’t miss out on opportunities to grow your investment accounts by prematurely timing the market. We know it can be tempting, but there are better strategies for investing. If you’re not sure what your next step should be, work with a trusted financial advisor with investment knowledge and experience who prioritizes your best interests as you pursue your financial goals.

At The Rosamond Financial Group Wealth Management, we take pride in helping our clients make the most out of their portfolios and feel confident in their long-term financial decisions. To learn more about how we can help you navigate market volatility and answer questions about market timing, reach out to us at 830-798-9400 or email You can also see what clients are saying about working with us.

About Preston

Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, and a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing or scheduling a call on his online calendar.