Don’t Try to Time The Market

09/03/2024

Don’t try to time the market.

Out of the S&P 500’s 20 worst days since it began in 1923, three of those days occurred in the same month at a time we can remember quite well – March 2020. On March 9, the S&P 500 decreased by 7.6%. A few days later on March 12, it went down another 9.51%. On March 16, it sank an astounding 11.98%. The market became very volatile as the unknowns of COVID swept the world.

If you were to have invested $10,000 on March 1, 2020 into the S&P 500, you can imagine the panic that could set in during your first couple of weeks of investing. Your $10,000 would have shrunken to $8,230 within 16 days, and your mind would be racing. “How did I make such a bad decision?” During a time like this, fear can set in and it’s tempting to place an emotional sell – that is to make a quick decision to cut your losses, sell the investments and tuck the cash back in your bank account.

However, it’s important to zoom out. The S&P 500 has averaged approximately 10.64% per year over the past 100 years. Just like a bad car part doesn’t make it a bad car, a bad period in the stock market does not take away its track record and value. The longer you invest in the stock market means the more opportunities you have to perform well.

Now let’s get back to our original scenario. It’s March 16, 2020, you have $8,230 and you’re going to stick this out.

You actually wouldn’t have to wait long! Your patience would have paid off by May 26, less than two months later, as your account hit  $10,058 at the day’s market close. If you held it until:

-          12/31/20 - your balance would be $12,517.00

-          03/16/2021 (one year later) – your balance would be $13,344. 00

-          12/31/21 – your balance would be $16,066.00

-          03/16/2022 (two years later) – your balance would be $14,331.00

-          12/31/2022 – your balance would be $12,909.00

-          03/16/2023 (three years later) – your balance would be $13,085.00

-          12/31/2023 – your balance would be $16,036.90

-          03/16/2024 – your balance would be $17,204.00 (four years later)

If you invest money for the long term, do not try to time the market! It rarely works, and when it does it is usually because of blind luck. Stay invested. Ride the waves. History usually repeats itself.

*The dollar values listed are approximates. None of these numbers are a guarantee of performance. Please talk with me about your specific situation. I never charge for meetings or advice; I only get paid directly from accounts that I manage.