Timing the Market

When I first began investing as a college student, I thought I knew everything. I had taken a handful of investing classes, and trading was becoming very easy to do online, albeit with commission charges that are now mostly a thing of the past.

One investment I wanted to make was in an S&P 500 index fund. So I purchased some shares, and after they dropped a bit, I bought a few more. I knew this was what intelligent investors did, and I followed the playbook. I would be patient and wait for my price before buying any more.

I set a price target and began waiting. Then, at the perfect moment, I would use all my remaining cash to buy the dip whenever it came.

The market went down over the next few weeks but never reached my price target. Over a decade later, the market is several hundred percent higher and likely never to come close to that arbitrary number I made up in my dorm room.

Reflecting on this missed opportunity and what I should have done differently, I realize I should have asked myself what this money was for.

I was 20 years old and investing for the rest of my life. That never occurred to me. I was too caught up in the day-to-day movement and focused on getting the best deal.

Since then, I have invested at much higher prices because that’s where the market went. In hindsight, I could kick myself for not just putting the money to work and getting back to focusing on more important things.

I wasn’t trying to time the market. There was no future price target for me to sell this investment at. These shares were a long-term/forever hold. I just wanted to get the best deal, but it never came.

I’ve learned that over decades, there’s not much difference between a 634% gain and a 629% one. But there is a big difference between sitting in cash and missing everything.

I want to clarify that this is not a recommendation to invest everything today because there’s no time like now.

Instead, it is a reminder to ask yourself that simple question that I didn’t: What is this money for?

Your money may be meant for short-term goals, sustaining an ideal life, or leaving a family or charitable legacy. Of course, the strategy of investing (or not investing) will differ for all of these, but the answer will likely point us in the proper direction.

“Is now a good time to invest?” is a question we receive often. But, if we are wise, the answer to that will be much more internal and personal than concerning any external world affairs.

It is natural to want to focus on the daily market climate because it is so noisy and in our faces, but tuning that out to think more about our goals truly makes us successful long-term investors.

I would love to hear your thoughts on the subject, and please let us know how we can help.