Time In Markets (Not Market Timing) is Key to Building Wealth

You've probably heard this axiom before: "The definition of insanity is doing the same thing over and over again and expecting a different result."

Such a sage principle of life is especially true when it comes to investing. Stock and bond markets are places where millions of different traders meet each day to agree on a price that both buyers and sellers can find acceptable — i.e., fair.

"No single trader can know more than or have a consistent advantage over the millions of other market participants around the world," noted Mark Hebner in his book "Index Funds: The 12-Step Recovery Program for Active Investors." He added: "Markets are likely to reward long-term investors, not short-term speculators." ¹

The IFA Founder and CEO characterizes those who think they can consistently beat such odds as "time pickers." Hebner wrote:

"Time pickers or market timers claim the ability to predict the future movement of the stock market, moving into the market before it goes up and getting out before it goes down. However, numerous studies from industry and academic experts demonstrate market times have no such ability to beat the market, and they should be avoided just like the lion's cage at (P.T.) Barnum's circus." ²

How harmful can mistiming markets be to your portfolio? The chart below illustrates hypothetical data related to the impact that missing a few of the market's best-performing days can have on long-term returns. While this data provides insight into the benefits of remaining invested in the stocks comprising the IFA SP 500 Index, it is important to note that these figures are based on hypothetical modeling and may not reflect actual market conditions or future outcomes. Key takeaways from such research included:

A hypothetical $1,000 turned into $7,135 from 2005 through 2024.
The return dwindled to $3,271 if you missed the blue-chip index's 10 best days.
Missing the best 20 days resulted in your return dropping to $1,967.
Staying invested throughout this period would've returned an annualized 10.32%.

The lesson here: A strong correlation generally exists between time invested and growth of wealth.

As a result, IFA offers clients complimentary holistic financial planning on an ongoing basis. We've also developed a range of different financial calculators and educational resources to help make sure you remain on-track in achieving your holistic financial goals over the long haul.. These are tools designed to assist in long-term planning, but they do not replace individualized financial advice tailored to specific needs (These can be found by clicking different icons listed at the top of IFA.com.)

Footnotes:

1.) Mark Hebner, "Index Funds: The 12-Step Recovery Program for Active Investors," page 87, Step 3: Stock Pickers; 10th Edition, 2023.

2.) Mark Hebner, "Index Funds: The 12-Step Recovery Program for Active Investors," page 106, Step 4: Time Pickers; 10th Edition, 2023.

The statements, quotes, and references included in this article reflect the views and opinions expressed by their respective authors and sources. Such material is presented solely for educational and illustrative purposes and does not necessarily reflect the official views or opinions of Index Fund Advisors, Inc. ("IFA"). While efforts have been made to ensure accuracy, quotations from external sources should not be construed as definitive or predictive of future market outcomes or investment success.

References to performance data, including hypothetical and back-tested results, are based on past information and assumptions and do not reflect live client accounts or portfolios. Illustrations of hypothetical or historical data are provided for informational purposes only. Hypothetical performance results depend on assumptions that may not reflect future market conditions, and outcomes could differ materially. Such data should not be relied upon as definitive guarantees or assurances of future results. Past performance is not indicative of future results, and all investments involve risks, including the potential loss of principal. No investment strategy, including remaining fully invested, can guarantee profitability or protection against losses. All investments involve risks, including the potential loss of principal. IFA strongly recommends seeking personalized advice tailored to your specific financial situation and goals.

For more information about Index Fund Advisors, Inc, please review our brochure at https://www.adviserinfo.sec.gov/ or visit www.ifa.com.

About Index Fund Advisors

Index Fund Advisors, Inc. (IFA) is a fee-only advisory and wealth management firm that provides risk-appropriate, returns-optimized, globally-diversified and tax-managed investment strategies with a fiduciary standard of care.

Founded in 1999, IFA is a Registered Investment Adviser with the U.S. Securities and Exchange Commission that provides investment advice to individuals, trusts, corporations, non-profits, and public and private institutions. Based in Irvine, California, IFA manages individual and institutional accounts, including IRA, 401(k), 403(b), profit sharing, pensions, endowments and all other investment accounts. IFA also facilitates IRA rollovers from 401(k)s and 403(b)s.

SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

— Risk Capacity —

Survey

Please estimate when you will need to withdraw 20% of your current portfolio value, such as a need for a house down payment or some other major financial need.