Forget trying to time the market.  Develop your plan and then stay the course instead.


There seems to be many of us who desire to constantly tweak our investments.  Surely, we think, this is the time to sell (or is it to buy?)!  The market is sure to go up (or down?)!  I just heard (fill in the blank) and I need to buy/sell this/that now!

Maybe we saw a story on the news.  Perhaps it was a tip from a “friend”.  Could we have read something on the Internet that has us fired up to make a change to our investments?

Here’s my take on whatever “tip” you’ve received: forget about it!  Stay the course.

Trying to time the market is a loser’s game – except for your broker who makes money when you trade!  Could that be why some brokers encourage such stories and hysteria?

Year after year, statistics show that even professional money managers don’t outperform the market, despite the high fees they charge.  In fact, nearly nine out of every ten professionals don’t outperform the market! Why do we think that we can?  We can’t.  Stop trying.

If you’re still tempted to move in and out of the market, here’s an interesting statistic:  For the four year period ending December 31, 2014, the average return for the S&P 500 was about 13% per year.  During this period, there were about 1,000 stock market trading days.

Question:  If you missed the 14 best performing days out of the 1,000 sessions, what would have been your average annual return over the four year period?

Answer:  Zero.

Yes, the entire gain for that 1,000 day period occurred on just 14 trading sessions!  Sure, no one would probably miss all of them, but it’s certainly reasonable to believe that you’d miss many of them if you were constantly moving into (and out of) the market.

The point is that missing a few days here and there can dramatically affect your investment returns.  No one predicted the 14 best days between 2011 and 2014.  And no one will be able to pick the best 14 days in the next four year period either!  Stay the course instead!


For the 66 years between 1949 and 2014, there were 12 periods that the market was rising and 11 periods when the market was declining, as shown on this chart produced by Edelman Financial:

stay the course

However, note the length of these periods.  The length of the average increasing market is 50.5 months.  The average length of the downturns is only 17 months!  In other words, while the S&P 500 had nearly as many down markets as up markets, overall the S&P was up over 75% of the months for 66 years.  Why would you want to unplug from investing when you have a 75% chance of it increasing in any given month?

If the casino’s in Las Vegas gave you those odds, you’d become a professional gambler.  The stock market has given you those odds in the past.  Maybe it’s time to act like a professional investor!

I’ll be the first to admit that these downturns can be extremely painful when you’re going through them!  We can look back and see when prior downturns ended, but we don’t know when the current one we’re living through will end.  It’s scary.  I get it.

But if history is any guide (and it is), we should have the expectation that while it will be painful, it will also be relatively short!

2016 has been a great illustration of the value of staying the course.  The first two weeks of the year were the worst opening two weeks in the HISTORY of the US market.  Pretty scary, right?  I know it was for me as I retired from full-time work on January 1st!  Overall, the market was down about 10% in the first six weeks of the year.

However, over the following six weeks the entire loss was recovered!  In fact, the S&P 500 and Dow Jones Industrial Average were slightly POSITIVE for the year!  If you let fear overcome you causing you to sell in February, you missed out on the recovery.

These scary drops are also good news for investors with a plan (here’s my plan).  What do we do when a product we like goes on sale?  We buy more!  Investors should do the same with stocks.  We hold a portion of our investments in bonds that can easily be sold and reinvested in stocks at rock bottom prices.  If you’re still working and investing in your 401k, rejoice when the market tanks because your future payroll with-holdings will be invested at lower stock prices.

Is there ever a time to change your plan?

Hopefully you agree that staying the course increases your odds of long-term success.  But is there ever a situation that would warrant a change in plans?

If your circumstances change, a revision to the plan may be appropriate.  For example, impending retirement or receiving a large inheritance would be great times to review your plans to make sure they fit your new situation.  The point is that the change in plans in based on a life change – not based on what the market has recently performed or what you think it will do in the future.


Instead of driving yourself crazy trying to outsmart the market, develop your own plan using sound investment fundamentals.  Then go lead your life!  Turn off the investment talking heads if you need to.

Bottom line: Stay the course!


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