Should you time the market?

Consider 3 investors with the same strategy. Each started with $99,000 over the course of 41 years, they bought stocks, reinvested dividends, and never sold the stocks. When they weren’t buying stocks, they held their money in a savings account that gave them 3% returns per year.

Case Study #1: Tiffany, she saved her money until the day of the worst stock market crashes in history. She purchased at the top in 1987 losing (-33%), 1990 (-19.7%), 2002 (-49%), 2009 (-56.5%), and 2020 (-34.1%). After 41 years, the total value of her investments ended at $773,358. Not bad considering she bought at the worst possible times.

Case Study #2: Brittany, is the opposite of Tiffany. She’s a genius. She invested all of her saved money exactly at the bottom of the market. She predicted this 5 times in a row (virtually impossible). She bought all those stocks at a discount and her $99,000 ended up being worth $1,123,573. While that’s a lot of money, notice it’s not a huge difference between the best market timer, and the worst market timer. Why is that?

Case Study #3: Sarah, who didn’t buy at the market top or the bottom. She ignored all the noise, unsubscribed from every finance YouTuber, and invested $200 every single month into VTI or VOO starting in 1979 (even though those ETFs/Indexes didn’t exist at that point). She ended up with the most in her brokerage account, exactly $1,620,708. This is because she didn’t wait to start, and she let compound interest do the work for her much earlier than everyone else while getting the standard average returns in the stock market.

Case Study #4: Negative Nancy, she saved for 41 years in a high yield savings account at 3% because she was afraid of investing. She just left it in there for 41 years. In total, she ended up with only $332,000.