Time in the Market Beats Timing the Market

Every investor wants to buy low and sell high. Almost nobody can do it on purpose.

The people who do best are usually the ones who buy and then leave it alone.

The best days problem

A handful of days drive most of the market's return. They tend to arrive right after the worst days.

Studies of the S&P 500 find that missing the ten best days over 20 years cuts the final result roughly in half.

You cannot catch those days if you are sitting in cash waiting for calm.

The market has fallen 10% or more in most years. It has fallen 20% or more about once every six years.

Yet over every 20 year period on record it has finished higher. The drops are the toll you pay for the growth.

Compounding needs time and continuity. Every exit resets the clock and often locks in a loss.

Charlie Munger put it simply. The first rule of compounding is never to interrupt it unnecessarily.

Decide how much you can leave invested for ten years or more. Invest that, regularly, in low cost broad funds.

Ignore forecasts. Rebalance once a year.

Use the dollar cost averaging calculator if you are nervous about investing a lump sum.