At an all-time high, the stock market may be a topic of conversation at BBQ’s and family gatherings this summer. Should I get in? Should I get out? People are always looking for the ‘right’ time to invest or sell. But, there’s a problem with trying to time the market. Not only is getting the timing right incredibly difficult, but you must do it twice! Once to get out of the market and another to get back in. In other words, successful market timing requires the ability to anticipate future declines and increases and act on them quickly.

Dimensional Funds in their piece “Timing Isn’t Everything” makes the assertion outguessing the market is difficult, if not impossible.

“Attempting to buy individual stocks or make tactical asset allocation changes at exactly the “right” time presents investors with substantial challenges. First and foremost, markets are fiercely competitive and adept at processing information. During 2018, a daily average

of $462.8 billion in equity trading took place around the world.[1] The combined effect of all this buying and selling is that available information, from economic data to investor preferences and so on, is quickly incorporated into market prices. Trying to time the market based on an article from this morning’s newspaper or a segment from financial television? It’s likely that information is already reflected in prices by the time an investor can react to it.”

While consistently timing the market correctly is nearly impossible, there are certain things that can yield positive results:

A Thorough and Simple Investment Philosophy

It’s well known not having a structured investment philosophy ahead of time can produce poor results. Randomly buying stocks at the advice of a neighbor or media can create a smorgasbord of inefficient investments. Crypto or cannabis stocks may be hot, but are they in alignment with a long-term investment philosophy? How much should you allocate to US and International markets? Should your investments be completely passive or include funds with active tilts to capture certain factors? Research your philosophy ahead of time and test the portfolio.

Diversified Portfolio Construction

There’s a common phrase in diversification: “If you’re not always unhappy with at least one piece of your portfolio, then you’re not diversified.” Investing in a company because it has a global footprint isn’t enough to achieve the benefits of diversification. An example of diversification includes investments in US and international markets, bonds of varying duration, etc.

Avoid Investments with High Cost and Little Value

Over time costs can eat away at investment performance. The key is finding funds with appropriate costs for the value received.

Use Tax-Efficient Investments Appropriately

An often overlooked strategy in investing is selecting tax-efficient funds. In an IRA or 401(k) this doesn’t matter so much, but in a taxable account taxes can erode returns over time. Picking investments ahead of time such as ETFs, low turnover funds, and municipal bonds are examples of strategies to minimize taxes.

Understand Risk Tolerance

When stocks are hot, people tend to be more ‘risk-on’. When markets are choppy, people tend to be more risk averse. One of the biggest mistakes investors can make is to sell in a panic or abandon investment strategies when markets get tough. Understanding risk tolerance prior to investing can help you keep a level head in all market conditions. These decisions are best made in strong markets ahead of any adversity.

It’s understandable. People may want to time the market so they feel like they’re making the best investment possible. But, as long as you have time to let capital markets work, history has rewarded disciplined, long-term investors regardless of their timing.

Curious how we invest? See our Investment Philosophy

Talk with us about your portfolio or financial plan here: Talk with an advisor

More Reading: Stacking Charitable Giving to Maximize Tax Breaks

[1] In US dollars. Source: Dimensional, using data from Bloomberg LP. Includes primary and secondary exchange trading volume globally for equities. ETFs and funds are excluded. Daily averages were computed by calculating the trading volume of each stock daily as the closing price multiplied by shares traded that day. All such trading volume is summed up and divided by 252 as an approximate number of annual trading days.

Advisory services offered through One Degree Advisors, Inc. For a full list of disclosures please see our website at

Retirement Recap.

Join the 1,000+ other retirees and receive weekly articles and videos to help you retire with confidence.

Subscribers also gain access to our exclusive monthly client memo that we don't share anywhere else.

We don’t spam! You can unsubscribe at any time.