What happens when you fail to time the market?

The impact of being out of the market for just a short period of time can be profound. Take a look at this hypothetical investment in the stocks that make up the Russell 3000 Index, a broad US stock market benchmark, to illustrate my point.

A hypothetical $1,000 investment made in 1997 turns into $10,367 for the 25-year period ending December 31, 2021. Over that same period:

• If you miss the Russell 3000’s best week, which ended November 28, 2008, the value shrinks to $8,652.

• Miss the three best months, which ended June 22, 2020, and the total return dwindles to $7,308.

You get the picture.

Despite what some investment managers may tell you, there’s no proven way to time the market - targeting the best days or moving to the sidelines to avoid the worst - so the evidence suggests staying put through good times and bad.

Missing only a brief period of strong returns can drastically impact the overall performance of your portfolio. I strongly believe that investing for the long term helps ensure that you’re in the best possible position to capture what the market has to offer.

Whenever that might be.