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Why is Timing the Market a Bad Idea?

Market timing involves making trading decisions based on expectations that the market will move in a specific direction. In theory, market timers identify and trade troughs and peaks (buying low, selling high) before other investors to capture larger profits. But in practice, it’s impossible to guarantee the timing or direction of market volatility

6 reasons timing the market is a bad idea 

Market timing sounds like a great way to get rich: just invest in the right stock at the right time. But that’s easier said than done…and betting otherwise carries steep risks. 

Here’s why.

  1. Markets move unpredictably 

Long-term, markets generally gain value. But which assets gain and when isn’t set in stone. Market performance is influenced by dozens of factors, including geopolitical events, economic shifts and earnings calls. In short: guaranteeing that an asset will move in X direction at Y time is virtually impossible. 

  1. You can’t do it just once

Trying to time the market isn’t a one-off act: taking a profit requires buying and selling at the right time. Effectively, every investment requires two separate acts of perfect timing. Statistically speaking, the odds are not in your favor.

  1. Extra risk for relatively little extra reward

A 2021 test by Charles Schwab found that market timing produced just 10% higher gains than dollar-cost averaging or lump-sum investing. And aside from incurring extra risk, achieving those results assumes perfect timing every time.  

  1. Missing the best days results in enormous losses

Market timing carries a specific kind of opportunity risk: namely, missing the market’s best days. One Bank of America study shows just how huge that mistake can be. 

The study’s authors looked at S&P 500 data between 1930 and 2020. If an investor bought early and stayed put, they would have seen a 17,775% return over 90 years. 

But if they missed just the 10 best days of each decade, those 90-year returns shrank to just 28%. 

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Source: Bank of America via CNBC
  1. Market timing requires your time

The average investor likely doesn’t have the background or time to dedicate to market timing. You can’t just pick a random stock: it’s important to understand the underlying company, broader market trends and economic and geopolitical influences. Add that to working, sleeping and spending time with family and friends, and you suddenly need more than 24 hours in a day.  

  1. You have massive competition

Unless you have billions to invest, market timing means you’re battling much bigger fish. We’re talking institutional traders, billionaires and lightning-fast computers that trade in nanoseconds. Every dollar the “big guys” move is a dollar that can impact asset prices and throw off your predicted gains.    

Focus on time in the market with

It’s an unfortunate reality that the odds of successfully timing the market are against you. But historically, a long-term, buy-and-hold investment strategy proves successful more often than not. 

That’s why recommends not timing the market, but time in the market. With our diverse range of AI-backed Investment Kits, we make it easy to invest in a mix of assets that fit long-term themes and current trends

No, we can’t guarantee that you won’t still see occasional losses. But if an AI can’t beat the odds on market timing…well, it’s a good bet the average investor can’t, either.

Disclosures is the trade name of Quantalytics Holdings, LLC., LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of's investment advisory services.

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