When it comes to investing, there’s a popular saying: “Time in the market beats timing the market.” But what does this mean, and why should it matter to you? Let’s break it down in the simplest way possible.
What Does “Time in the Market” Mean?
“Time in the market” means keeping your investments in place for a long time. Instead of trying to buy and sell based on short-term market movements, you let your investments grow over time, riding out the ups and downs of the market.
What is “Timing the Market”?
“Timing the market” is when you try to predict the best time to buy or sell investments. The idea is to buy when the market is low and sell when it’s high. While this might sound like a good plan, it’s incredibly hard to do consistently, even for professional investors.
Why Is “Time in the Market” Better Than “Timing the Market”?
- Markets Go Up Over Time The stock market and other investments tend to rise in value over the long term, despite short-term fluctuations. By staying invested, you give your money the chance to grow over many years.
- Avoid Missing the Best Days The best days in the market often come right after the worst days. If you try to time the market and miss these good days, your returns could be much lower. Studies show that missing just a few of the best days can hurt your overall returns.
- It’s Hard to Predict the Market No one can predict exactly when the market will rise or fall. Even experts get it wrong. Trying to time the market often leads to mistakes, like selling during a dip or buying during a peak, which can result in losses.
- Compounding Growth The longer you leave your investments in the market, the more you benefit from compound growth. This means your returns earn returns, helping your money grow faster.
Simple Example:
Let’s say you invest £1,000 today. If you leave that £1,000 invested for 10 years, even if the market goes up and down during that time, your investment is likely to grow overall. If you try to time the market, you might end up selling during a dip and missing out on the recovery.
Stay Invested for the Long-Term
The key takeaway is this: investing for the long term, and staying in the market, is usually a better strategy than trying to predict short-term movements. By keeping your money invested over time, you give it the best chance to grow and benefit from compounding.
Remember, the best time to invest is now, and the longer you stay in the market, the better your chances for financial growth. To find out how Digby Associates can help you with investments, contact us through our online form, check out the investment section of our website or download one of our free information guides.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested