Market timing is tempting. Many investors believe they can buy at the bottom and sell at the top. But history shows how costly it can be to miss even a handful of the market’s best days.
Take the S&P/NZX 50 Index, a broad New Zealand share market benchmark, from 2002 to 2024:
- $1,000 invested at the start of 2002 and left untouched would have grown to $6,642 by the end of 2024.
- Miss the best week, and that drops to $5,843 – a loss of $799 (12%).
- Miss the best three months, and you’d have $5,013 – a loss of $1,629 (25%).
- Miss the best six months, and you’d be left with just $4,892 – a loss of $1,750 (26%).
The reality of market timing
The problem is simple: there’s no proven way to consistently predict when those “best days” will happen. They often occur during periods of high uncertainty – exactly when many investors are most likely to exit the market.
The smarter approach
Rather than trying to jump in and out, staying invested allows you to capture the full potential of the market over time. Consistency and patience often matter more than timing.
The takeaway
Trying to time the market isn’t just difficult – it’s costly. A disciplined, long-term investment strategy keeps you in position to benefit from the market’s growth.
Reference: Data adapted from Dimensional Fund Advisors.
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