Market Timing – A Losing Game

The stock market crash of 2008-2009 is a very recent memory for many investors who still bear the scars from the experience. At Rockbridge, we also have prospective clients who walk into our offices saying that they haven’t recovered yet from the financial pain their portfolio endured over those several months.

Why? It’s usually a combination of some or all of the following factors:

• Their advisor trying to time the market
• Lack of broad diversification
• Excessive investment and advisory fees
• Emotional response to short-term market fluctuations

“More money has been lost trying to anticipate and protect from corrections than actually in them.”

– Peter Lynch, renowned Fidelity fund manager –

The last 10 years haven’t given investors the risk-appropriate returns they deserved (a 50% stock and 70% stock portfolio basically had the same 10-year result), but if you stayed the course, you’re certainly not “still recovering” from 2008-2009.

For example, a $100,000 investment (50% stocks and 50% bonds) at the market peak at the end of 2007 returned to $100,000 only 13 months after the market bottom, as shown by the graph below. This is not something we want to experience again, but certainly a result most investors could live with given the circumstances.

Now, how do you accomplish that result?

• Stay the course
• Diversify your investments
• Keep investment costs low
• Limit emotions by having and sticking to a plan

“The investor’s chief problem and even his worst enemy is likely to be himself.”

– Benjamin Graham, “The Father of Value Investing” –

We can’t predict or control what the crowd will do in the financial markets we are seeing today, but we can increase our odds of a successful outcome by controlling the aspects of investing that can be controlled: diversification, asset allocation, costs and discipline.

We might see a period of negative stock market returns in 2017, but we don’t know. All we do know is that the best way to guarantee underperforming the market is to not be invested in the market, so our answer is to stay the course and periodically review your portfolio with us to be sure the level of risk you are taking is appropriate for your specific goals.