The Cost of Trying to Time the Market

December 03, 2015

During the second quarter of this year, we published a short video on our website titled “The Cost of Market Timing.” I want to revisit this important theme as we reflect on the volatility of the market over the last few months. Market timing is defined as, "the act of moving fully in and fully out of one’s investment positions based on the expected future movement of the market."

One of the greatest challenges in trying to time the market is not just deciding when to throw in the towel, but when to get back on the horse. And emotionally, we feel like throwing in the towel most often after a quick market decline. However, history has taught us that some of the best days are those immediately following a decline. If we have sold our investment positions, we have committed the mistake of missing those rallies and reinvesting at higher prices after the market has stabilized.

The principle we learn in this video has served us well this year and should continue to serve us well in the future.