Time in the Market, Not Timing the Market
One of the biggest mistakes I saw people make wasn’t about what they invested in. It was about when they started.
They’d wait for the “right time.” Wait for the market to drop. Wait until they understood everything. Wait until they had more money saved up.
And while they waited, years passed. And those years cost them more than any market timing strategy ever could have made them.
The Math That Changes Everything
Let me show you two people. Same income. Same investing goals. Different start dates.
Person A starts investing at age 22. Puts away $300 a month for 10 years, then stops completely at age 32. Never adds another dollar.
Person B waits until age 32 to start. Invests $300 a month for 30 years straight until retirement at 62.
Who ends up with more money at 62?
Person A: $1,072,000
Person B: $678,000
Person A invested for 10 years. Person B invested for 30 years. Person A put in $36,000 total. Person B put in $108,000 total.
Person A still wins. By nearly $400,000.
That’s the power of time in the market. (Assuming 10% average annual returns, which is the historical average for the S&P 500.)
Why This Happens: Compound Interest
Albert Einstein supposedly called compound interest “the eighth wonder of the world.” Whether he actually said it or not, the principle is real.
Your money doesn’t just grow. It grows on the growth. And then it grows on that growth. And then it grows on that growth.
The longer your money sits in the market, the more times it compounds. Early years are worth more than later years because they have more time to multiply.
That $300 Person A invested at age 22? It had 40 years to compound. The $300 Person B invested at age 32? Only 30 years.
Ten years doesn’t sound like much. But over decades, it’s the difference between over a million dollars and $678,000.
Time In the Market vs Timing the Market
Here’s what people try to do: wait for the market to drop, then invest when it’s “cheap.”
The problem? Nobody knows when that’s going to be.
I watched people sit on cash in 2013 waiting for a correction. The market kept climbing. They finally bought in 2015 after missing two years of gains.
I watched people panic-sell in March 2020 when COVID hit. The market recovered in months. They missed it.
I watched people wait for the “right moment” for years. The right moment never came. Or it came and they didn’t recognize it.
The data backs this up: A study by Charles Schwab compared different investing strategies over time. They looked at someone who invested at the absolute perfect time every year (the market bottom), someone who invested at the worst time every year (the market peak), and someone who just invested consistently regardless of timing.
The difference in returns after 20 years? Almost nothing.
The person who timed it perfectly beat the person who just invested consistently by less than 1% annually. But the person who waited on the sidelines trying to time it? They lost decades of growth.
Completion Not Perfection
I used to tell clients: completion not perfection. You don’t need to understand everything before you begin. You don’t need a PhD in finance. You don’t need to read every investing book ever written.
You need to understand enough to not make catastrophic mistakes, then start.
Here’s “enough”:
- Know which account to use (we covered this last week)
- Know what to buy (we’re covering this in two weeks – spoiler: index funds)
- Know you’re investing for decades, not days
- Know you’ll keep adding money regularly
That’s it. Start with that. You’ll learn the rest as you go.
The “But What If…” Questions
“What if the market crashes right after I invest?”
It might. It probably will at some point. Doesn’t matter. You’re not pulling the money out for 30 years. It’ll recover. It always has.
“What if I’m buying at the peak?”
Maybe you are. Or maybe this “peak” will look like a valley ten years from now. Nobody knows. That’s why you invest consistently over time instead of trying to nail the perfect entry point.
“What if I wait and invest more later?”
You just saw the math. Person B invested 3 times more than Person A and still ended up with almost $400,000 less. Waiting costs you more than you think.
The Best Time Was Yesterday
There’s an old saying: “The best time to plant a tree was 20 years ago. The second best time is today.”
Same goes for investing.
If you’re in your early 20s and reading this, you have the most valuable asset in investing: time. Use it.
If you’re 35, 45, or 55 and reading this, you’ve lost some time. You can’t get it back. But you still have years ahead of you. Don’t waste those too.
Here’s what I learned over the years: completion not perfection. Starting with good enough beats waiting for perfect every single time.
The biggest mistake isn’t starting at 32 instead of 22. The biggest mistake is being 42 and wishing you’d started at 32.
Your Action Step This Week
If you already have your investment accounts open: Make your first contribution this week. Even if it’s just $50. Get the account funded and pick what to invest in (we’ll cover what to buy in a couple weeks).
If you don’t have accounts yet: Go back and read last week’s article. Open a Roth IRA. It takes 15 minutes.
Don’t wait for perfect. Perfect doesn’t exist. Start now. Let time do the heavy lifting.
See you at the top.
