A friend of mine sold all his stocks just before the COVID crash in March 2020. He thought he’d timed it perfectly. But the problem came next. The market rebounded in a V-shape, and he had no idea when to buy back in. He finally re-entered in early 2021 when the S&P 500 recovered to its highs. He avoided the crash — but also missed the V-shaped recovery. His final return was lower than if he’d just held.
What Is Market Timing?
Market timing is the strategy of selling at market peaks and buying at market bottoms. Theoretically perfect. Practically nearly impossible.
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50 Years of Data: What Happens When You Miss the Best Days
According to JP Morgan Asset Management research, for the 20-year period from 2003 to 2022, investing in the S&P 500:
- Holding the entire 20 years: average annual return of 9.8%
- Missing the top 10 best days: average annual return of 5.6%
- Missing the top 20 best days: average annual return of 2.0%
- Missing the top 30 best days: average annual return of -0.4%
Missing just 30 days out of 20 years turns returns negative. More importantly, these best days tend to come right after market crashes. If you sell to avoid the crash, you miss the recovery too (JP Morgan, 2023).
Why Market Timing Fails
According to Morningstar research, approximately 80% of investors using market timing strategies underperform a simple buy-and-hold strategy (Morningstar, 2022).
Three reasons: First, it’s impossible to accurately call market tops and bottoms. Second, you have to get it right twice (timing when to sell + timing when to buy back). Third, transaction costs and taxes accumulate.
Time in Market Is the Answer
Peter Lynch said staying in the market longer matters more than predicting the market. He also noted that investors lose more money trying to predict crashes than they lose in actual crashes.
Investors who bought the S&P 500 and did nothing typically outperformed those who actively tried to time the market over 20 years. Simply staying in the market is itself a strategy.
My Strategy: Auto-Transfer and Ignore
On payday each month, I automatically buy ETFs via a standing transfer — and don’t look at my portfolio after that. I only open it once per quarter for rebalancing. That’s how I resist the temptation of market timing. If I don’t look, I don’t feel the urge to sell.
Disclaimer: This article is written for investment education purposes. Past returns do not guarantee future results. All investments carry the risk of loss of principal.
Disclaimer: This article is for educational and informational purposes only. It is not a substitute for professional medical advice, diagnosis, or treatment. Always consult a qualified healthcare provider with any questions about a medical condition.
Your Next Steps
- Today: Pick one idea from this article and try it before bed tonight.
- This week: Track your results for 5 days — even a simple notes app works.
- Next 30 days: Review what worked, drop what didn’t, and build your personal system.
Last updated: 2026-03-16
About the Author
Written by the Rational Growth editorial team. Our health and psychology content is informed by peer-reviewed research, clinical guidelines, and real-world experience. We follow strict editorial standards and cite primary sources throughout.
References
- JP Morgan Asset Management. (2023). Guide to the Markets Q1 2023. JP Morgan.
- Morningstar. (2022). Mind the Gap 2022. Morningstar Research.
- Malkiel, B. G. (2019). A Random Walk Down Wall Street. W. W. Norton.
- Bogle, J. C. (2007). The Little Book of Common Sense Investing. Wiley.
- Federal Reserve Bank of St. Louis. (2023). S&P 500 Historical Returns. FRED.