In a recent article for USA Today, investment guru Ken Fisher warns that it’s impossible to miss market downturns and that “even the greatest investors are wrong maybe a third of the time.”
But there’s good news, he adds: “You don’t need perfect timing to achieve marvelous returns. Time in the market beats timing the market—almost always.” He offers the example of three hypothetical investors placing $10,000 in U.S. stocks each year between 1977 and 2018, a span of time that he notes includes five bear markets.
The first investor is assumed to have perfect timing and enjoys each year’s upside, the second has terrible timing and the third simply invests the first day of each year (knowing he has no ability to time the market). Fisher outlines the average annual returns in each case:
- Perfect timing (Investor 1): 11.4%
- Poor timing (Investor 2): 11.1%
- Terrible timing (Investor 3): 10.8%
Fisher points out that “time overwhelmingly swamps timing, good or bad,” and explains why this is true in each of the above examples. He adds that after the financial crisis many investors stayed out of the market for years, yet U.S. stocks are up 419 percent (with dividends) since March 2009. “You didn’t need marvelous timing to come out ahead.”
In conclusion, Fisher writes, “Remember these examples the next time markets sag and you want to bail—or the next time you have cash you’re waiting to invest.”