Illustration: “Time in market” > “Timing the market”

I’m sure there are different versions of this example, but this is a parable-like story about a cautious and responsible yet unlucky guy who made 4 investments at the worst possible time. It is a good reminder for the long-term investor when he’s getting nervous. ____________________________________________________ Meet Bob. Bob is the world’s worst market timer. What follows is Bob’s tale of terrible timing of his stock purchases. Bob began his career in 1970 at age 22. He was a diligent saver and planner. His plan was to save $2,000 a year during the 1970s and bump that amount up by $2,000 each decade until he could retire at age 65 by the end of 2013 (so $4,000/year in the 80s, $6,000/year in the 90s then $8,000/year until he retired). He started out by saving the $2,000 a year in his bank account until he had $6,000 to invest by the end of 1972. Bob’s problem as an investor was that he only had the courage to put his money to work in the market after a huge run-up. Luckily, while Bob couldn’t time his buys, he never sold out of the market even once. He didn’t sell after the bear market of 1973-74 or the Black Monday in 1987 or the technology bust in 2000 or the financial crisis of 2007-09. Even though he only bought at the very top of the market, Bob still ended up a millionaire with $1.1 million. ____________________________________________________ I didn’t backtest the math, but I pretty confident it’s correct. Regardless, it shows value of the “time in market” over “timing the market” perspective, although one can benefit from both, since you can try to put it in as soon as you can when you can, but that’s not always possible. So then you dollar cost average as well when that’s more reasonable, especially when it’s more beneficial during volatile periods. And unfortunately it’s still to easy to be our own worst enemy. https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

What if You Only Invested at Market Peaks?

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