What if you could perfectly time the market?
“How will the election affect the market? Will a resurgence of the virus cause a market crash again? Is now a good time to invest? Should I wait?”
I am having more and more conversations that start like this, and I totally get it. Nobody wants to lose money. More importantly, nobody wants to feel dumb because they invested at the worst possible time.
But I can’t tell the future. You can’t tell the future. Nobody has those answers.
So I decided to run a little experiment to see how timing the market actually impacted your performance.
I answered these questions:
What if you could perfectly time the market? How much better could it be?
What if you had terrible luck and invested at the worst possible time in history?
Does timing even matter?
With the help of some friends (thanks Matt, Charlie, Sara and Mike), we ran numbers to find the answers.
Meet the contestants in our experiment:
1. Will, the Worst Market Timer since the 70’s. He stockpiles cash in a savings account and invests only on the WORST possible days in history, when the market is at an all time high just before a crash. Then he stockpiles more cash until the next worst day, and on and on, crowning him the man you least want to take investing advice from.
2. Bob, the Best Market Timer since the 70’s. He stockpiles cash in a savings account and buys only on the BEST possible days in history, when the market is at the very bottom of a crash. Bob is officially the luckiest man on the face of the Earth.
3. Steady Eddie. He doesn’t care about timing the market. He automatically puts money in the S&P 500 every month. "Whatever happens, happens," is Eddie's motto.
On your mark. Get set. GO!
Pretty interesting, huh?
Without a shadow of a doubt, consistently investing money will make you more money over time than keeping money on the sidelines and buying at the perfect time.
And his victory should be an encouragement to you. You don’t need to be perfect with your timing.
As a matter of fact, you'll be in a WAY better position if you invest as early and as often as you can.
Get your money out of a savings account and get it working for you.
As the saying goes, time IN the market beats TIMING the market.
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