Traders work on the floor of the New York Stock Exchange on Oct. 1, 2025, in New York City. (Spencer Platt/Getty Images/Tribune Content Agency)
Jill Schlesinger
A friend recently contacted me asking whether I had time to review her investment accounts. She prefaced the meet-up with this note: “I’m waiting for the market to drop before putting my recent, big commission payment into the market.”
This came within days of another message from a listener: “Should I do something with my 401(k) before the bottom falls out?” If only we knew when that was going to be!
I’m often asked to peek into portfolios when stock market indexes reach new highs or after gut-wrenching plunges. In both cases, I say, “I have no idea what is going to happen in the short term.”
Perhaps that’s due to the fact that I have been at this for almost 40 years, which would qualify me as a “seasoned investor.” In fact, a more apt metaphor from the cooking world is that I am a “tenderized investor,” one who has directly felt the heavy force of markets, which has broken down my misguided belief that I could accurately identify asset tops and bottoms.
Two pieces of research from the summer bolster my case. A Charles Schwab study asked: Does market timing work? The answer was clear: “The best strategy for most of us is not to try to market-time at all.”
The research examined five approaches to investing a lump sum of $2,000 annually over 20 years. There was: the perfect timer, who through dint of luck, invested at the low point of the year; the consistent investor who invested on the first trading day of the year, the monthly investor who divvied up the amount by 12; the bad timer, who invested at the top of the market every year; and the procrastinator who left his money in cash investments.
Not surprisingly, the person who could consistently invest at the bottom of each calendar year fared the best, but not by that much — about $700 per year over the 20 years. The worst was the investor “waiting for the bottom,” thus missing out on the stock market’s growth.
The takeaway from the report was clear: “It’s nearly impossible to accurately identify market bottoms on a regular basis.” That leaves a rational, long-term investor with the tried-and-true game plan of determining “how much exposure to the stock market is appropriate for their goals and risk tolerance and then consider investing as soon as possible, regardless of the current level of the stock market.”
Separately, Fidelity’s inaugural State of the American Investor study reinforces the concept that a bull market can undermine what we know in our brains to be true: That we can somehow do better than the market.
This analysis focused on “DIY investors,” or those who manage their own portfolios. “Despite nearly half of self-directed investors predicting the market will perform worse in the next 12 months, most (64%) believe their own portfolios will perform the same or better in the same time period.” So, two-thirds of these folks think that they can beat the market, based on… their feelings!
As I have written in the past, when markets are rising, it’s easy to feel like a genius, but the seasoned (or tenderized) investors among us understand that while timing the market can be alluring, it requires two perfect decisions: when to get out and when to get back in.
Because nobody knows what is going to happen in the short term, my consistent/boring advice is to create a financial plan that incorporates good and bad times, and an investment strategy that will see you through both. Remember that the key is not timing the market, but time in the market.
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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at http://www.jillonmoney.com)
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