It's Never the Right Time to Time the Market

It's Tricky to time a market, to time a market that's right on time

It's Tricky...it's Tricky (Tricky) Tricky (Tricky)

It's Tricky to time a market, to time a market that's right on time

It's Tricky... Tr-tr-tr-tricky (Tricky) Trrrrrrrrrrricky

- altered lyrics from "It's Tricky" by Run-D.M.C.


We recently came across an old article referencing a Fidelity study that analyzed the performance of its client accounts. The surprising result was that the best returns occurred in accounts whose owners had either passed away, or forgot they even had an account there. Basically, dead people and absentee account owners outperformed alive and active account holders.


As the article highlights, diversification and long-term buy-and-hold strategies often work best. Another way to explain this is market timing is nearly impossible. Market tops and bottoms are only knowable in hindsight. Looking at the one-year return of the S&P provides a simple example of the psychic ability required in identifying turning points.


Chart 1 – Foresight needed to correctly time the S&P tops & bottoms over past 12 months

1 year Russell 1000 cumulative return

Source: S&P Global, Jackson Creek Investment Advisors


Despite the inherent difficulties with market timing, investors often feel taking action is superior to doing nothing. The behavioraleconomics.com website explains why this might be so. We have dipped our toes into this area of research but have not found anything we could implement consistently in real time. This is why we believe in being fully invested. We implement this belief across both our Institutional and High-Net-Worth clients.


The strongest returns are realized during the early stages of new bull markets. Unfortunately, those inflection points are only attainable by holding through volatile periods with short-term losses. Market timing increases the chances of selling during the downturn and buying back after missing large gains.


If you are concerned about asset declines and have near-term liquidity needs, that should be addressed with asset allocation decisions. Investors with longer time horizons can (and should) withstand inevitable corrections to benefit from the subsequent strong gains. Compounding is extremely advantageous to those that stay invested.


Hopefully, your retirement accounts can gain through deliberate inactivity instead of death and forgetfulness - because timing a market is Tricky.

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