The Dangers of Market Timing: What You Should Know

What the Data Really Says About Market Timing

This slide deck dives deep into one of the most persistent investing myths: that you can improve outcomes by trying to time the market. Using historical data from the S&P 500 going back to 1950, it shows the cost of selling during volatility, the impact of missing recovery days, and why waiting for the “perfect” entry point rarely pays off.

The key message? Markets pull back regularly - but they also recover. Investors who stay the course during these periods tend to outperform those who react emotionally or try to sidestep short-term declines.

Staying Invested Beats Market Timing

The data in this presentation makes a strong case for staying invested through market ups and downs:

• Market pullbacks are common: 5% declines happen frequently, even in strong years.

• The best days often follow the worst: Meaning if you exit during volatility, you’re likely to miss the rebound.

• Timing the market underperforms: Strategies like selling at each 5% drop and buying back at new highs significantly lagged simply staying invested.

• Even poor timing works out long-term: Investing at market peaks or during crises has still delivered positive long-term returns.

• Politics and valuations don’t help much: Returns have been consistent across political regimes, and forward P/E ratios haven’t reliably predicted short-term performance.

The takeaway? Investors are better off staying in the market than trying to outsmart it. Consistency, not prediction, is what drives long-term results.

If you’re ready to take the guesswork out of investing, contact us for advice today.

Compound Wealth are based in Mount Maunganui, Tauranga and offer KiwiSaver, Investment & Retirement Financial Advice to clients all over New Zealand.