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Owners’ Manual Principle 5: Act

Waiting to invest can cost you.

Can you do better by waiting for the perfect time to invest? Probably not. When we compared four hypothetical clients who invested $2,000 a year for 20 years, we found that investing immediately on the first day of each year, regardless of market conditions, almost always led to better outcomes. Only an investor with perfect timing—investing at the very lowest point each year—did slightly better.

Average ending wealth in each 20-year period, 1926–2014

Perfect Timing $179,116 Invest Immediately $166,464 Bad Timing $145,885 Stay In Cash Investment $65,464
  • Perfect timing
    Invested at the market’s lowest point each year
  • Invested immediately
    Invested on the first day of each year regardless of market conditions
  • Bad timing
    Invested at the highest point each year
  • Stayed in cash
    Kept money in Treasury bills

About this chart. This chart compares the outcomes for four hypothetical investors who invested $2,000 a year for 20 years. The first investor (perfect timing) invested each year at the market’s lowest point. The second invested immediately on the first day of each year. The third (bad timing) invested each year at the market’s highest point. The fourth stayed in T-bills. The first and third investors invested their yearly $2,000 investments in T-bills while waiting to invest in stocks. Stocks are represented by the S&P 500® Index, with all dividends invested. Indexes are unmanaged, do not incur fees or expenses, and cannot be invested in directly. Fees and expenses would lower returns. This chart represents a hypothetical investment and is for illustrative purposes only. The actual annual rate of return will fluctuate with market conditions. Past performance is no indication or guarantee of future results. Source: Schwab Center for Financial Research.

Three good reasons to get off the sidelines:

Inflation can outpace you.

Holding substantial assets in cash or investments that pay almost no return may feel safe, but if you’re not earning at least enough to cover the rate of inflation, your money could be losing purchasing power.

Big changes can happen fast.

Big market changes—both positive and negative—often occur in just a few short days or even minutes. Even professional investors rarely call them with precision.

You can start slowly.

If you’re hesitant to commit all your assets at once, consider entering the market more gradually by investing smaller amounts over a period of weeks or months.

At Schwab, we encourage you to stay involved and stay invested. Ask us to help you get started.

Let’s talk.


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Note: Periodic investing strategies do not ensure a profit or protect against a loss in a declining market.

Important information

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets.

Small-cap securities are subject to greater volatility than those in other asset categories.

For general educational purposes. Nothing in this document should be considered a solicitation or a recommendation by Schwab to buy, sell, or continue to hold securities or other investments or to open an account.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Schwab refers to our investment professionals as Financial Consultants. There are certain eligibility requirements if you are interested in working with a dedicated Financial Consultant.

Products with lower fees do not guarantee higher returns or that investors will experience lesser losses during periods of market decline.

The implementation of any recommendations made as a result of advice provided may result in trade commissions or other fees, charges, or expenses.

Investments and investment strategies are not without risk, including the potential loss of principal invested. Past performance is not an indicator or guarantee of future results.

Terms referenced throughout this manual describing our relationship with you, as well as services referenced throughout this brochure, are brokerage services provided by Charles Schwab & Co., Inc. We offer our clients planning assistance, educational content, research, and other services that are without a fee and incidental to Schwab acting as a broker-dealer. When we work with you as a broker-dealer, we do not make investment decisions for you or manage your accounts on a discretionary basis. No part of this manual shall be interpreted by any party as Schwab acting as a registered investment advisor and providing investment advisory services, such as ongoing discretionary portfolio management for a fee.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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