Why You Should Avoid Timing the Market | Fisher Investments Common Retirement Investing Mistake #2

Transcript

[Music] trying to time the market is almost impossible and mistakes can be very costly corrections or sentiment driven market drops of about 10 to 20 percent can come without warning and the recovery that follows can be just as fast bear markets are fundamentally driven market declines of 20 or more for an extended period that often come on slowly and without announcing themselves importantly bear markets are based on fundamentals corrections are sentiment based and can change rapidly that's why it is so hard even for investment professionals to time the market for a long-term equity investor we believe it's prudent to stay invested unless you have strong reasons to believe the market is in the early stages of a prolonged downturn with most of the losses still ahead and your reasons must be unclouded by emotion or other biases consistently identifying a bear market early on let alone predicting one before it starts is extremely difficult to fully benefit from stocks superior long-term average returns you need to stay invested further trying to sidestep short-term bouts of negative volatility can have significant consequences if you're wrong and in truth it's probably more a matter of when you're wrong than if we know no one's smart enough and savvy enough to time all market moves being out of the market can mean missing important updates which can add up to huge opportunity costs over time the s p 500 index has grown 2 754 cumulatively from january 1988 through the beginning of november 2020 but if you miss just the 10 best days in the market over that period then your cumulative return would drop to one thousand two hundred eight percent and your annualized return would drop from ten point seven percent to eight point one percent even seemingly small differences in your annualized return can have a tremendous impact over years of investing this exhibit shows how a 500 000 initial investment in 1988 would have grown depending on whether you remained fully invested or missed some of the best up days just missing the 10 best updates would reduce the final value of your portfolio by more than half thanks for watching you can check out our other six common retirement investing mistakes to learn more about what to avoid as you plan for your financial future if you enjoyed this video you can click the subscribe button and ring the bell to be notified when we publish new content thanks for watching [Music] you