Trying to time the market—predicting the perfect moments to buy low and sell high—may seem like a smart strategy, but it often leads to more harm than good for investors. Market movements are influenced by numerous unpredictable factors, including economic data, geopolitical events, and investor sentiment, making it nearly impossible to consistently forecast short-term highs and lows. Studies have shown that missing just a few of the market’s best-performing days can drastically reduce long-term returns. Instead of attempting to outguess the market, investors are generally better served by staying disciplined, maintaining a diversified portfolio, and focusing on long-term goals. The key to successful investing is discipline. Here's why keeping a long-term investment strategy is crucial:
Impact of Missing the Best Days (S&P 500)
A study by J.P. Morgan Asset Management analyzed the performance of the S&P 500 from January 1, 2003, to December 29, 2023.
This data illustrates that missing even a handful of top-performing days can have a drastic impact on overall investment returns.
Current Market Volatility Due to Tariffs
Recent tariff policies have introduced significant uncertainty and volatility in the markets:
Market Corrections: The S&P 500 and Nasdaq Composite have entered correction territory, each falling by over 10% from their recent highs. A correction is a decline of 10% or more from a recent peak in the stock market, indicating a short-term reversal in the prevailing trend. This means that the market is experiencing a significant downturn, which could be a sign of a short-term reversal in the market's direction.
Investor Sentiment: Unpredictable tariff announcements have heightened market instability, eroding investor confidence and contributing to sharp market fluctuations.
Economic Indicators: Preliminary data suggests potential economic slowdowns, with some forecasts indicating a possible GDP contraction in the near term. These indicators may include a decrease in consumer spending, an increase in unemployment rates, or a decline in manufacturing output.
Key Takeaways
Best Days Often Follow Worst Days: Historically, some of the best market days occur shortly after significant downturns. Attempting to time exits and re-entries can result in missing these critical rebounds.
Compounding Benefits: Remaining invested allows the power of compounding to work in your favor, enhancing long-term growth. Compounding is the process of reinvesting your investment returns, resulting in exponential growth over time. This means that the longer you stay invested, the more your returns will grow, thanks to the power of compounding.
Challenges of Market Timing: Predicting short-term market movements is exceptionally challenging, even for seasoned investors. Market timing requires predicting not only the direction of the market but also the timing of the change, which is a task fraught with uncertainty and risk. It's important to understand that market timing is not just about predicting the market's direction but also about predicting when that change will happen. This is a highly uncertain and risky task, even for experienced investors.
Considering current market volatility driven by trade tariffs, it's advisable to maintain a disciplined, long-term investment approach. Strategies such as diversification and dollar-cost averaging can help mitigate risks associated with short-term market fluctuations.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.
The Cost of Missing Key Days
May 14, 2025 by Jeff Watson
Trying to time the market—predicting the perfect moments to buy low and sell high—may seem like a smart strategy, but it often leads to more harm than good for investors. Market movements are influenced by numerous unpredictable factors, including economic data, geopolitical events, and investor sentiment, making it nearly impossible to consistently forecast short-term highs and lows. Studies have shown that missing just a few of the market’s best-performing days can drastically reduce long-term returns. Instead of attempting to outguess the market, investors are generally better served by staying disciplined, maintaining a diversified portfolio, and focusing on long-term goals. The key to successful investing is discipline. Here's why keeping a long-term investment strategy is crucial:
Impact of Missing the Best Days (S&P 500)
A study by J.P. Morgan Asset Management analyzed the performance of the S&P 500 from January 1, 2003, to December 29, 2023.
This data illustrates that missing even a handful of top-performing days can have a drastic impact on overall investment returns.
Current Market Volatility Due to Tariffs
Recent tariff policies have introduced significant uncertainty and volatility in the markets:
Key Takeaways
Considering current market volatility driven by trade tariffs, it's advisable to maintain a disciplined, long-term investment approach. Strategies such as diversification and dollar-cost averaging can help mitigate risks associated with short-term market fluctuations.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.