Thumbs Down: Bad Timing

Physician's Money Digest, September30 2004, Volume 11, Issue 18

Trying to figure out when the stockmarket is going to right itself soyou get out in time? Don't. Guessingwhich way the market will move inthe short term is generally a loser'sgame. The Dalbar Group of Bostonrecently completed a 20-year study ofmutual investors in 2004. Examiningthe flows into and out of mutualfunds since 1983, the study of investors'behavior found that markettimers in stock mutual funds lost 3.3%per year on average. Over a periodwhen the S&P 500 grew by nearly13%, the average investor earnedonly 3.5%. The investor's returns weremuch lower because they tried totime the market and did it badly—what most investors do. It's time inthe market that makes investors succeed,not timing the market.