Why I Don't Try to Time the Market (And You Shouldn't Either)
by Malik Amine
Key Takeaways
- Timing the market (trying to buy low and sell high) sounds smart but almost always underperforms staying invested
- Missing the 10 best days in the market over 20 years cuts your returns by more than half
- The S&P 500 has returned about 10% annually over the long term, but only if you stay invested through downturns
- Emotional reactions (panic selling in crashes, greed buying at peaks) destroy wealth
- The winning strategy is boring: invest consistently, rebalance annually, ignore the noise
I get this question all the time: "Should I sell my stocks? The market feels high."
Or: "Should I wait to invest? I think the market is going to crash."
Here's my answer every time: You can't time the market. I can't time the market. Nobody can time the market consistently.
Let me show you why.
What Does "Timing the Market" Mean?
Timing the market means trying to predict when stocks will go up or down, and then buying/selling based on those predictions.
Examples:
- "The market is at all-time highs. I'll sell now and buy back when it crashes."
- "There's a recession coming. I'll move to cash and wait it out."
- "This stock is going to 10x. I'll put all my money in it."
It sounds logical. Buy low, sell high. That's how you make money, right?
The problem: You have to be right TWICE. You have to correctly predict when to sell (the top) AND when to buy back in (the bottom). Get either one wrong and you lose.
What Does the Data Say About Market Timing?
The data is brutal. Study after study shows that trying to time the market destroys returns.
Example 1: Missing the best days
From 2003 to 2023 (20 years), the S&P 500 returned about 9.8% annually if you stayed invested the whole time.
But if you missed just the 10 best days over those 20 years (trying to time the market and sitting in cash), your return dropped to 5.6% annually.
Miss the 20 best days? Your return dropped to 3.2% annually.
Miss the 30 best days? You basically broke even (0.4% annually).
Translation: Missing a handful of days over 20 years (less than 0.2% of trading days) cut your returns by MORE THAN HALF.
And here's the kicker: The best days often happen right after the worst days. If you panic-sell during a crash, you miss the recovery.
Example 2: COVID-19 crash (2020)
In March 2020, the S&P 500 dropped 34% in about a month. People panicked and sold. "The world is ending. I'm going to cash."
Then the market recovered. By August 2020 (5 months later), the S&P was back to all-time highs. By the end of 2021, it was up 60% from the March 2020 low.
If you sold in March 2020 and waited for "things to calm down," you missed one of the fastest recoveries in history.
Source: Morningstar data on S&P 500 performance, 2003-2023
Why Is Timing the Market So Hard?
Three reasons:
1. The best days are unpredictable
The best days in the market often happen during the worst MONTHS. In 2008 (financial crisis), the S&P 500 had its worst year in decades. But 6 of the 10 best single-day gains in history happened in 2008.
If you sold to avoid the crash, you also missed the best recovery days.
2. Emotions override logic
When the market drops 20%, your brain screams "SELL BEFORE IT GETS WORSE." When the market is up 50%, your brain screams "BUY BEFORE YOU MISS OUT."
This is backwards. You should buy when stocks are cheap (during crashes) and sell when they're expensive (during bubbles). But emotions make you do the opposite.
Behavioral economists call this loss aversion. Humans feel the pain of losses about twice as strongly as the pleasure of gains. So we make irrational decisions to avoid losses, even when staying invested is the right move.
3. You need to be right twice
Let's say you successfully predict a crash and sell at the top. Congratulations, you got the first part right.
Now what? When do you buy back in?
- If you buy too early, you lose money as the market keeps dropping.
- If you buy too late, you miss the recovery.
Most people who sell during a crash NEVER buy back in. They sit in cash, watching the market recover without them, waiting for "the right time." That right time never comes.
Real example from a client (names changed):
2022, the S&P 500 dropped about 18%. My client panicked and sold everything in March. "I'll buy back when it's lower."
The market kept dropping through October (down 25% total). But he didn't buy. "It's going to drop more."
Then the market recovered. By January 2024, the S&P was back to all-time highs. He STILL hadn't bought back in. "It's too high now. I'll wait for a pullback."
He's been sitting in cash for 2+ years, missing a 40%+ gain.
What Should You Do Instead of Timing the Market?
The winning strategy is boring:
1. Invest consistently (dollar-cost averaging)
Instead of trying to "buy the dip," invest the same amount every month (or every paycheck) no matter what the market is doing.
Why it works: You automatically buy more shares when prices are low and fewer shares when prices are high. Over time, this averages out to a good cost basis.
Example: You invest $1,000/month in an S&P 500 index fund.
- January: S&P at $4,500. You buy $1,000 worth.
- February: S&P drops to $4,000 (crash). You buy $1,000 worth (you get MORE shares).
- March: S&P at $4,200 (recovering). You buy $1,000 worth.
By investing consistently, you took advantage of the dip WITHOUT trying to time it.
2. Rebalance once per year
Over time, some investments will grow faster than others. Your portfolio gets out of balance.
Example: You want 80% stocks, 20% bonds. After a great year for stocks, you're now 90% stocks, 10% bonds.
What to do: Once per year, sell some stocks and buy bonds to get back to 80/20. This forces you to "sell high" (stocks just had a great year) and "buy low" (bonds lagged).
3. Ignore the noise
Turn off CNBC. Stop checking your portfolio every day. Unfollow the people on Twitter who claim they predicted the last 3 crashes (they didn't).
The noise is designed to make you feel like you're missing something, or like disaster is around the corner. It's designed to make you TRADE. And every time you trade, you're probably making a mistake.
4. Stay invested through downturns
This is the hardest part. When the market drops 30%, it FEELS like you should do something.
But the data is clear: The best returns come from staying invested through the bad times.
Historical fact: The S&P 500 has had positive returns in about 75% of all calendar years since 1928. But if you only look at 10-year periods, the success rate is over 90%. The longer you stay invested, the more likely you are to make money.
Source: S&P 500 historical data, 1928-2024
What About "Big Crashes"? Shouldn't I Sell Before Those?
No.
Even if you KNEW a crash was coming (you don't), the best move is usually to stay invested.
Example: 2008 financial crisis
The S&P 500 dropped 57% from peak to bottom (October 2007 to March 2009). Brutal.
But if you stayed invested and didn't sell:
- By 2012, you were back to even
- By 2016, you had doubled your money from the bottom
- By 2024, you had quadrupled your money from the bottom
If you sold in 2008 to "avoid the crash," you likely never bought back in. You missed a 15-year bull market.
What About Smart People Who Claim They Can Time the Market?
They got lucky. Or they're lying.
There are famous examples of people who "called" crashes (like Michael Burry shorting the housing market in 2008). But for every person who got it right once, there are 1,000 who got it wrong.
And even Michael Burry has been wrong MANY times since 2008. He's been predicting crashes almost every year. If you had followed his advice, you'd have missed massive gains.
Fun fact: Studies of professional money managers (people whose full-time job is picking stocks and timing markets) show that over 90% of them UNDERPERFORM a simple S&P 500 index fund over 10+ years.
If professionals can't do it, what makes you think you can?
Source: S&P Indices Versus Active (SPIVA) scorecards
Summary
Market timing sounds smart, but the data shows it destroys returns. Here's what works instead:
- Invest consistently (dollar-cost averaging, not lump-sum gambling)
- Rebalance once per year (forces you to sell high, buy low)
- Ignore the noise (CNBC, Twitter, your neighbor who "called the crash")
- Stay invested through downturns (the best days happen during the worst months)
The S&P 500 has returned about 10% annually over the long term, but ONLY if you stay invested. Try to be clever and you'll underperform.
I can't time the market. You can't time the market. Nobody can. So stop trying. Invest, rebalance, ignore the noise, and let compounding do the work.
Boring? Yes. Effective? Absolutely.
Sources:
- Morningstar: "The Cost of Missing the Best Days in the Market" (2003-2023 data)
- S&P 500 historical returns (1928-2024)
- SPIVA scorecards (active vs passive performance)