Market Timing
An investment strategy that attempts to predict future market movements to buy before rises and sell before declines.
What is Market Timing?
Market timing is the practice of making buy or sell decisions based on predictions about future market or asset price movements, with the goal of entering before prices rise and exiting before they fall. Despite its intuitive appeal, decades of academic research consistently show that professional investors and individual traders rarely sustain successful market timing over extended periods. Missing just a handful of the market's best days has an outsized negative impact on long-term returns, as strong gains are often concentrated in short periods that are nearly impossible to predict. Most financial research supports systematic strategies such as dollar-cost averaging and buy-and-hold as more effective alternatives.
Example
A JP Morgan Asset Management study found that missing the 10 best trading days of the S&P 500 between 2002 and 2022 would have reduced a $10,000 investment's final value from approximately $64,000 to just $29,000 — a gap of $35,000. Seven of the 10 best days occurred within two weeks of the 10 worst days, illustrating why attempting to avoid downturns often means missing the strongest recoveries.