When it comes to investing, slogans are no substitute for strategy. But if there’s one investing adage that comes close to a rock-solid principle, it’s this: Time in the market is more important than timing the market.
For most people, building wealth is a long-term endeavor. It’s the product of disciplined saving and investing—and time. Obviously, no strategy can protect you against losses when markets tumble. But committing to a regular savings and investing plan that gives your investments time to grow is an important step toward your future financial security.
My own experience investing through an IRA was an important lesson. Back in 1982, I started contributing $2,000 to my IRA every year. When I converted the account to a Roth IRA 19 years later, I had contributed a total of $38,000 but the value of my account had grown to $201,658—despite significant market downturns along the way. That is the miraculous power of compound growth.
Your own returns may differ substantially depending on your preference for risk, chosen asset allocation and future market and economic conditions, but the principles remain the same. What’s important is that you commit to a regular investing schedule and take advantage of the only other factor you can control, which is time in the market.
If you’re waiting for the “perfect” moment to invest, there’s really no time like the present. Research by the Schwab Center for Financial Research has shown that putting your money to work as soon as possible is the best way to increase your wealth over the long term. Trying to “time” the market can cause you to miss the biggest market gains.
If you’re not comfortable investing large lump sums, you could make small, more-frequent investments. For example, with a dollar-cost averaging strategy you could invest a set amount of money on a regular basis, regardless of how the stock market is performing. When the market is down and prices are low, you’ll buy more shares. When the market and prices are up, you’ll buy fewer shares.
Again, investing takes perspective and discipline. But the costs of sitting on the sidelines can be high.