Time IN and TimING the Market

Yesterday and today are great reminders of why you always hear me talking about “time in the market being more important than timing the market. What am I talking about? Well, yesterday’s headlines read something along these lines, “Market sets new records as the Dow jumps 200 points to start the new year!” In other words, “Get excited! The market is booming!” Now, what do we see this morning? “Dow drops 200 points after airstrike spikes oil prices.” Doom and gloom, right. How are you supposed to keep up with it all!? What do you do?! I’ll get to that later.

One of my favorite movies of all time is “Newsies”, everyone who knows me, knows this. No shame, it’s great. Every morning when the boys go to pick up their papers to sell, they are hoping for a great headline. Something bold, juicy, that will play on the emotions of people and get them to spend their hard-earned cash (remember this is depression era) on a newspaper. Why am I telling you this? Because some things never change. News outlets still need that same bold headline to drive traffic. Now we just call it “clickbait”, but it’s there to play on your emotions and get you into the website, where they hope that you will click on the article, giving their ad holders some views, and earning their news corporation some money. What does it do to you? It either makes you panic or get excited, driving your reaction to make some change in your investments.

Why is that bad? A ton of reasons! But the main one, timing is hard. You are trusting yourself to make two correct moves: when to get out, and when to buy back in. Either one of those decisions is difficult enough on their own, let alone trying to get them both right. Your best traders out there bat about 30% on average and they are pros. What’s the likelihood of you getting it correct? About as good as Buzz’s girlfriend…woof. Let’s face it, market movement is out of our control, so when you make moves like this, you’re letting your emotions and ego get the better of you.

I said earlier I’d get to what to do. Well first off (insert shameless plug), hire an advisor! Why? They are there to take the emotion out of this situation and be your objective voice of reason. They are there to remind you of your overarching plans; to talk you through how a move like this can affect your plans to travel more, build your dream home, send your kids to college, or start that business you’ve always wanted. But, if you are a do-it-yourselfer, step away from your device. Take a moment to reflect on why you are investing in the first place. The math and data will tell you that it is a far greater opportunity to stay invested, brave these storms, and trust your allocation, than take the risk that comes with trying to make two perfect moves in timing these market swings. Remind yourself of your time horizon. When are you actually going to be needing this money, for whatever it is you are investing? See the forest through the trees. Most importantly, breathe.