Investing Is About Time – Not Timing
Why Time in the Market is Your Most Powerful Investment Tool
Johnnie Hampel
Co-founder, Client Relationships
Central intelligence for money and life
Having worked in personal finance for over 25 years, I’ve found that even the best investors find it very, very difficult to time markets. The simple reason for this is that there are always two decisions you make when you time markets: when to sell and when to buy back again.
Think back to the 2008 global crisis. I remember when the global stock market had fallen about 40% in 2008 and then another 15% at the start of 2009, everyone thought the world was ending. Many sold in a panic. Yet, that was exactly the beginning of one of the longest bull markets in recent memory. Despite falling in January and February 2009, the global stock market posted a 31% return for the full year, followed by another 12% in 2010.
While some lucky investors sold before the bottom, very few had the nerve to buy back in when fear was at its peak.
We saw history repeat itself in 2020. The shock of the Covid pandemic caused a 34% market crash in a matter of weeks. What happened next? A shock rally on the back of better news left the market actually returning over 16% for the full year 2020.
You don’t have to look too far back to see how unpredictable these swings can be. The pessimism of 2022, when the market dropped 19%, quickly gave way to a surprisingly strong recovery. The market jumped over 24% in 2023 and continued to climb with a 19% gain in 2024.
Fast forward to 2025, the year of increased volatility in global stock markets – especially in US stocks. In April of this year, President Trump’s trade tariffs caused some of the largest US consumer stocks to drop by more than 9%. It has, at the time of writing, all but recovered its losses earlier in the year.
Ultimately, out of the last 30 years since 1994, there have been 22 positive years and in the 371 months there have been 227 positive months. But overall, the average annual return of the world stock market has been 7.5%. The conclusion I have reached is that no one has a crystal ball, month by month and year by year. The market will always have large falls, often followed by steep rises when fear is at its highest level.
This philosophy is supported by Y TREE’s proprietary research on public markets.
Why do we prefer time in the market over timing in the market?
Missing some of the best performing market days as a result of trying to time the market has a significant impact on your long-term returns.
For example, if you were invested since 01 January 2001, the best performing 10 to 20 market days have been the main drivers of over half of your annual return over this 25 year period. Clearly, not being invested on these days puts you at risk of losing out on the best opportunities to build long-term wealth.
While investing in equities at a 100% risk level provides higher returns than a diversified split of 60% equities and 40% bonds on a good day, those returns typically balance out by the time you have missed 10 of the best days each year. Past this, you are certainly bound to miss out on returns.
When you take into consideration how difficult it is to time the markets, taking a balanced, long-term view proves to be a safer strategy for capturing positive market returns.
The impact of missing the best days as shown by the average annualised performance of the past 25 years
Source: Y TREE proprietary research
Equity as represented by the MSCI AC WORLD USD Index.
60% Risk Level as represented by 60% MSCI AC WORLD in USD and 40% Bloomberg Barclays Global Aggregate USD Hedged All Share Total Return Index, daily.
Is it worth trying to avoid the bad days?
If you somehow manage to miss the worst of times, you may also miss the best of times. Our data shows that within a market stress, the best and worst days tend to occur within 3 weeks of each other. This makes it very difficult, if not an impossible exercise to capitalise on.
What makes timing the market even trickier is that, within the 3 week periods, on average, the very best and very worst daily market returns are no more than 10 calendar days apart.
This pattern can be observed during periods of extreme market volatility, During the 2008 economic crisis, there were just 6.5 days between the best and worst global market days of the year. In 2020, there were 5.6 days between the best and worst days, and so far in 2025, the figure stands at only 5 days.
Here’s the thing: the good days make up for the bad days in the long run. In fact, avoiding the 10 worst times would not have resulted in a material improvement to performance when factoring in the gains from the best times.
The best and worst performing 20 days since 2000
Source: Y TREE proprietary research as of 19/5/2025. Equity = MSCI AC WORLD USD Index, 60% Risk Level = 60% MSCI AC WORLD in USD and 40% Bloomberg Barclays Global Aggregate USD Hedged. All Share Total Return Index, daily.
Does it pay to wait for the market to drop?
With markets feeling on the expensive side and a rumoured recession on the horizon, you might be tempted to wait for a market correction before you invest. But this approach can still harm your long term returns.
Analysis of 115 years of US stock market history shows that, regardless of whether you’re waiting for a 1% or 10% market correction, there is likely to be a significant opportunity cost. The chart below indicates the range of returns you would have lost while waiting for the market to correct at different targets.
If you wait for the market to fall by 3% before you jump back in, the data shows that between a 1-5 year period, you are likely to lose out on between 8% and 19% of market returns on average.
While corrections are a reality in equity investing, you can’t bank on one occurring within a 5 year horizon. In fact, it could take an even longer time to materialise and, by that time, the market may be at a much higher level overall.
Simply, the opportunity cost associated with trying to time the markets is always much higher than investing today.
The Y TREE Approach
It’s tempting to think we can time the market. But my learning over the last 25 years, which includes investing with some of the best managers in the world, is that it’s near-impossible to predict future market moves – at least without a functioning crystal ball.
Once you appreciate that the market will always rise and fall over a lifetime (often when least expected) if you focus more on the role of your finances, rather than your finances in isolation, then short term market moves can simply be a distraction. The role of your finances is to fund your lifetime expenditure and other aspirations. Employing our proprietary asset/liability modelling tools (taking into account clients’ assets, debts, income and expenditure) we calculate a long term risk target, for each client’s portfolio, that is required to meet these goals.
Rather than guessing when a bad day might occur and trying to avoid it, we model what level of bad performance their portfolios can tolerate (including a stock market fall of around 50%), and if they can still meet their lifetime goals, there is no reason ever to deviate from the risk target.
The key to this long term approach is to take emotions out of the equation and to rebalance efficiently when markets rise or fall. Individuals are often driven by fear (on the downside) and greed (on the upside). As one institutional investor once told me, it takes intestinal fortitude to add risk during a market fall, but it is the right thing to do if the portfolio can tolerate it mathematically in the context of what it’s there to fund over a lifetime. Y TREE’s latest innovation, our Rebalanced Portfolio Service (RPS), automatically rebalances client portfolios everyday, making sure they are always kept at their target risk through thick and thin.
The Y TREE approach works over time. It is the approach we have learned from long term institutional investors who are proven to outperform short term investors. No more fingers in the air. Just the control, transparency and peace of mind of knowing that your finances will continue to support your life.
You’ll be pleased to know that you do not need to rely on market predictions (or psychic abilities) to successfully grow your wealth – the data overwhelmingly supports a strategy of time in the market for lasting investment growth.
As with all investing, your capital is at risk. Investors should be aware that past performance is not a reliable indicator to future performance.