Time in the Market, Not Timing the Market

The picture above is prominently displayed in the office of OnTrack Wealth Management.   Originally a paper napkin sketch by financial planner and sketch artist Carl Richards, it was featured in The New York Times.  It’s a reminder of two important lessons:

Lesson #1 – Markets can be SCARY at times!  It’s okay to feel uncertain and uncomfortable with them.  Emotionally, investors will be challenged to stay on track with their financial plans.  Step away from the daily grind of news and negative sentiment.  Ask yourself if anything has changed in your financial life that would require you to re-tool your financial plans?  If the answer is yes, seek advice from trusted sources like Certified Financial Planner™ fiduciaries.

Lesson #2 – Don’t try to time when to get into or out of the market.  Being invested in the market means riding the ups and downs.  Most importantly, history has shown that what goes down, goes back up and when the market goes back up again it can be robust.  Said another way, if you take your money out of the market during scary times you are likely to miss the best days that follow.   Consider this JP Morgan study (below) of the past twenty years of returns for the S&P 500.  In a nutshell, if you put $10,000 into the market and kept it there (through the Great Recession, the Pandemic Downturn, etc.) that investment would be worth $61,685 for average annual return of 9.52%.  Miss 10 of the best days – just 10 out of 7,300 days in a 20-year time frame – and your gain would be cut by more than 50% to $28,260!   If you missed 40 of the best days your return would actually be negative!

The bottom-line is that nobody knows when the best or worst days of the market are going to happen.  Thus, staying in the market is almost always the right move over the long-haul.