Timing the market is risky

Sources: Top chart: Dalbar, Inc., 30 years from 1992–2021; “Quantitative Analysis of Investor Behavior,” 2022, DALBAR, Inc., www.dalbar.com. Bottom chart: Bloomberg and Wells Fargo Investment Institute. Data from October 1, 1992 to September 30, 2022. For illustrative purposes only. Dalbar computed the average stock fund investor return by using industry cash flow reports from the Investment Company Institute. The average stock fund return figure represents the average return for all funds listed in Lipper’s U.S. Diversified Equity fund classification model. All Dalbar returns were computed using the S&P 500 Index. The S&P 500 Index is a market capitalization weighted index composed of 500 stocks generally considered representative of the U.S. stock market. The fact that buy and hold has been a successful strategy in the past does not guarantee that it will continue to be successful in the future. The performance shown is not indicative of any particular investment. An index is unmanaged and not available for direct investment. A price index is not a total return index and does not include the reinvestment of dividends. Total returns assume reinvestment of dividends and capital gain distributions. Past performance is not a guarantee of future results. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions.

Key Takeaways

  • Market timing is difficult. Investors who allow their emotions to get the best of them can suffer lower returns.
  • We do not advocate market timing, but we do believe that modest tactical shifts have the potential to take advantage of short-term investment opportunities or help mitigate short-term risks.