The Risks of Timing the Stock Market

Trying to time the stock market by selling investments during a decline and waiting for it to recover often leads to lower long-term portfolio performance. Even professional investors struggle with timing the market correctly, and buying back in after the recovery has started can make a significant difference. Data from Dalbar Inc. shows that investors' behavior has a detrimental effect on their returns, particularly during three- and five-year periods. Market-timing behavior has also hurt bond market investors. Long-term data demonstrates that missing the market's best days can significantly impact investment growth. Commitment and a steady approach, such as automatic contributions to retirement accounts, tend to yield better results.