Explore Our
“Off The Wall” Blog

Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.

Here’s the real cost of timing the market

Here's the Real Cost of Timing the Market

On days like today, do you find yourself saying, “I wish I bought in yesterday?” Or on days like yesterday do you say, “I really wish I had not just put money to work?”  There’s a real cost to timing the market, and the reality is that if you are someone holding a portfolio of securities, the facts show that you are better off riding it out than giving up on your investments and going to cash.  In a recent research report, LPL Financial Senior Market Strategist Ryan Detrick stated: 

“Although market timing is very alluring to investors, especially after the past few weeks, the reality is timing things incorrectly can set you back significantlyIn fact, if you started in 1990 and missed the best day of the year each year for the S&P 500, your annual return was nearly cut in half.” 

Below is a chart, also from LPL. It shows the annualized return for the S&P 500 from 1990 to 2019.  7.7%–It’s the blue bar all the way on the left. That’s for 30 years. Now, over that same time periodif you missed THE ONE SINGLE BEST DAY OF EACH YEAR, that 7.7% return drops to only 3.9%. (See the second bar from the left.)  How about missing TWO of the best days of each year? You would have been up less than 1% a year. (See the third bar from the left…Okay, I can let you take it from here, right?)  Why stop there?    Miss the best threeand youre at -1.8% annualized return.  Best five? Boom: -6.8% annualized. ANNUALIZED!  Fine, I’ll do it…I’ll actually mention the most extreme.  If you missed the best 20 days of each year, you’d be down 27% annualized. 

Market Timing S&P 500 Index Annualized Growth Rate

If you are a long-term investor and you don’t need cash out of your portfolio right now, play the odds and just leave your portfolio working for you. The Dow was up almost 11.4% today…miss a day like today and it hurts.  Having some cash as a hedge right now is okay, but when you are all cash and miss one or two big days, you can really impair the performance of your portfolio.  As they used to yell up at parachutists properly oriented into the wind and coming in for a landing at Airborne School, “Hold whatcha got Airborne!” 

Keep looking forward, 

Dave 

Military Parachute

What’s Next?

Hope from China, truth about stimulus, and why cash is the ultimate hedge

Important Disclosure Information

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Monument Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

David B. photo

David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

Learn more ...

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument.

Please remember that if you are a Monument client, it remains your responsibility to advise Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at https://monumentwealthmanagement.com/disclosures/. Please Note: IF you are a Monument client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Stay up to date!

Subscribe to our “Off the Wall” Blog for articles and videos on all things wealth management, by all members of our Team. Unlike Facebook, we will never share your data with anyone.