Gianluca Sidoti is an Independent Financial Advisor, Founder of TraDetector and Managing Partner at Citadines Capital SCF.
Market timing attempts to predict the best moments to buy and sell in the stock market. It’s an idea that captivates many investors—beginners and seasoned professionals alike—with the promise of avoiding losses and maximizing gains. As Warren Buffett said during the 2022 Annual Shareholders Meeting, “We’ve not been good at timing,” citing the Great Recession and the 2020 Covid crash.
The appeal of trying to buy low and sell high is understandable. Many investors wonder, “Wouldn’t it be better to avoid market downturns and reenter when prices are lower?” However, while this strategy sounds ideal in theory, it often proves ineffective in practice.
Is Market Timing Really Possible?
The allure of market timing lies in its promise of never losing and always winning. However, the reality is far more complex. Financial markets are influenced by countless variables, many of which are unpredictable. Geopolitical events, changes in monetary policy, technological breakthroughs and even natural disasters can all disrupt the market.
Even the most skilled analysts and traders frequently make mistakes in their predictions. Take, for example, the 2008 financial crisis. Few people foresaw the collapse of the housing market and the subsequent global economic meltdown. And of those, even fewer managed to time their entry into the market perfectly.
Another example is the market environment today. With conflicts in Ukraine and the Middle East, rising inflation and interest rate hikes, everything points toward a potential downturn. Yet, despite these conditions, the S&P 500 has posted a return of over 20% this year, as of this writing. I had clients hesitant to invest early this year due to negative headlines, but those who stuck to their long-term plans have already benefited from the market’s performance.
The Importance Of Time, Not Timing
As the famous investor Peter Lynch said, “I can’t recall ever once having seen the name of a market timer on Forbes’ annual list of the richest people in the world.”
One of the key problems with market timing is that it requires you to get it right twice—at the point of buying and the point of selling. Missing either moment can have serious consequences. As I often tell my clients, the critical factor isn’t timing—picking the exact moment to enter the market—but time, or how long you stay invested.
In theory, the best time to invest is when prices are low. But you can only know that low point in hindsight. In reality, the best time to invest is now. Why? Because time is the most powerful driver of returns, especially when combined with the power of compound interest.
I’ve had clients who were extremely hesitant to invest during moments of market turmoil. One such investor was especially cautious during the March 2020 downturn, uncertain of where things would go. At the time, it felt like an apocalyptic scenario. Yet, after we discussed the importance of sticking to her long-term goals, she decided to invest. Today, she looks back on that decision with relief, as her portfolio has grown substantially since then.
Focus On Goals, Not Headlines
Staying informed about world events is important, but the key is to observe these events with detachment. The constant barrage of news can overwhelm investors and lead to rash decisions. However, short-term downturns rarely impact the long-term results of a well-structured portfolio.
Trying to jump in and out of the market at the “right” moment can often be counterproductive. Instead of trying to outsmart the market, focus on building a long-term strategy that promotes growth over time.
I remember one of my clients who had been delaying investing for years, waiting for the “right” moment. We worked together on a financial plan where we examined a simple scenario: What if she had invested $100,000 in 2013? The investment would have grown over the years to over $347,000, assuming an annual return of 12%, which is a little less than the historical average annual performance of the S&P 500 from 2013-2023.
Each day spent not investing or not building a financial plan is time and money lost. The key isn’t trying to predict what the market will do tomorrow; it’s focusing on what you want your investments to achieve over the long term.
A Real-Life Example Of Staying Focused
One of my clients, planning to retire in 2047, aims to accumulate $1,200,000 by then. To achieve this, she invested $100,000 in a portfolio made up of 80% equities and added $1,000 per month into a systematic plan. Her focus isn’t on the short-term market noise, but on her long-term goal: retiring with financial security. This approach allows her to tune out the noise of economic policies and global events, keeping her on track to meet her goal.
Stay Calm And Focused On Your Long-Term Vision
When investing for the long term, it’s crucial to stay calm, even when the markets are turbulent. News headlines may cause anxiety, but over a 10-, 15- or 20-year period, short-term fluctuations will have little impact on your overall returns.
Trying to time the market is rarely a good strategy. Instead of worrying about short-term movements, focus on having a well-defined, personalized investment plan—one that aligns with your specific financial goals and risk tolerance.
Time, not timing, is the most powerful force in investing. The sooner you start, the more you stand to benefit from the compounding effect of your returns.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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