5. The Future Is Uncertain: Why Successful Investing Isn’t About Market Timing

As Nobel Prize-winning physicist Niels Bohr (or maybe Yogi Berra) famously said, “Prediction is very difficult, especially about the future.” Fortunately, successful investing doesn’t depend on accurately predicting the stock market’s highs and lows — it depends on patience. In other words, successful investing is less about timing the market and more about time in the market.

Even if you had a crystal ball to identify the lowest point of the market each year, your long-term success wouldn’t be significantly impacted. Let’s take a look at an example featuring two contrasting investors — Lucky Lou and Steady Eddy.

Beginning in January 2005, both Lou and Eddy started investing. Each invested $3,000 annually for the next 20 years.

As it turned out, Lou was a master of market timing. He invested his $3,000 exactly at each year’s low point, thus buying stocks when they were “on sale.” Meanwhile, Eddy contributed $250 every month, no matter what the market was doing.

After 20 years, Lou’s perfectly timed strategy yielded an average annual return of 11.9%. Not bad! But Eddy, who made no attempt at timing, achieved an average return of 10.2% — only slightly less than Lou’s improbable success.

In reality, most investors who try to time the market fare worse, often underperforming due to missed opportunities and failed timing attempts.

Instead of getting caught up in market-timing hype, we recommend sticking to a well-designed, long-term investment plan — one we can help you build as an SMI member. This approach will bring you peace of mind and may lead to better portfolio performance.

^{*Returns shown are based on simulated 20-year investment outcomes using monthly S&P 500 data from 2005–2024.}