Читать книгу Personal Finance After 50 For Dummies - Eric Tyson - Страница 98

A big mistake that novice investors make is trying to time the stock market; that is, they jump in when they think prices will rise and jump back out when they believe prices will fall. Even for the best professional investors, market timing is difficult, if not impossible, to do. It’s far more important and valuable to regularly save and invest than attempt to time the market. Inevitably, those who try to time the markets earn inferior returns.

Professors Geoffrey Friesen and Travis Sapp examined 14 years’ worth of money flows for more than 7,000 mutual funds. They found that timing decisions by investors reduced their annual returns by about 1.6 percent per year below what those investors would have earned through buying and holding. This underperformance persisted and was consistent through both up and down markets.

The professors found that investors made worse timing decisions when it came to withdrawals (selling) than they did with purchases (buying). The investors’ selling decisions led to an annual underperformance of about 1.8 percent per year versus underperformance of just 0.7 percent per year with buys. These numbers make sense because, more often than not, folks who panic and sell during a stock market decline tend to sell nearer the end of the decline and then fail to get back in before the rebound, which is usually sharp.

It’s the rare market timer who beats the market average returns. Many of these folks actually underperform a “buy and hold” approach. The reason for the underperformance is quite simple: The stock market can move up quickly, and if you’re sitting on the sidelines during one of these high moves, you miss out. That’s exactly what happened to many folks during the strong stock market rebound that ensued after the steep declines in early 2020 due to the government-mandated lockdowns and economic shutdowns during the COVID-19 pandemic and in 2008 and early 2009.