The Unluckiest Market Timer and Their Recent Trade

Investing in the stock market can be a nerve-wracking experience, especially during downturns. Like many others, I sometimes find myself tense and anxious when market prices are on the decline. Long periods of selling often lead to physical stress, and I feel muscle tension forming in my neck and upper back.

To handle these feelings, I remind myself that significant sell-offs are just part of stock market investing. The road to building long-term wealth is filled with ups and downs. A critical lesson is that "time in the market beats timing the market."

Allow me to share a recent experience that reinforces my belief that I'm the unluckiest market timer I know.

I Made Another Poorly Timed Trade

While I consider myself fortunate in many aspects of life, market timing isn’t one of them.

I rarely engage in active trading. However, on occasions when I have spare cash, I make investments outside of my routine contributions to retirement accounts.

Recently, I found myself in such a situation.

On February 13, I met with my accountant to discuss my upcoming tax returns for 2024. I discovered that I could reduce my taxable income. Thus, I decided to contribute more funds to my self-employed 401(k) plan.

I acted quickly and transferred cash into that account. On February 18, I purchased additional shares of an S&P 500 index fund, and the trade confirmation arrived the following day.

Ironically, February 19 marked the last time the S&P 500 reached a record high before descending into a correction, which we are currently experiencing.

This was not a trivial amount of money, and I know it was poorly timed. However, I do not view it as a mistake.

You might think I should have employed a dollar-cost averaging strategy to enter the market gradually. In fact, I already practice dollar-cost averaging as part of my income strategy. On these rare occasions when I have surplus funds, I tend to prefer making lump-sum purchases. With a 20-30 year horizon until retirement, I am not one to hold onto cash idly. Also, I have read about the risks involved in lump-sum investments and understand them well.

It’s a choice I’ve made, and I am aware of the risks.

Time is a Friend for an Unlucky Market Timer

This isn't the first time I’ve faced the challenge of effectively timing the market. I previously encountered similar scenarios in late 2015 and late 2021, where I also made lump-sum investments into S&P 500 index funds, right before significant sell-offs occurred.

My 2015 purchase coincided with the market nearing a 14% correction, while in 2021, I invested just before the start of a bear market that caused the S&P to drop by 25% before hitting bottom in October 2022.

Clearly, I am the unluckiest market timer I know.

Fortunately, as a full-time financial writer and researcher, I often explore data related to stock market exposure during various market conditions. This background has helped me make informed investment choices.

I have developed a personalized financial strategy that considers the risks of significant downturns, along with a time frame that allows me to weather short-term volatility as I work towards long-term wealth accumulation.

Thanks to thorough knowledge and a solid financial plan, I have remained focused on my investments. Today, those poorly timed trades from the past are showing gains, bringing me closer to my long-term financial goals.

The S&P 500 has gained around 170% since my investment in late 2015 and about 20% since my late 2021 and early 2022 purchases.

Being a Market Timer Like Warren Buffett

In line with billionaire investor Warren Buffett, I do not consider myself adept at market timing. Despite his reputation, Buffett, too, published an op-ed encouraging investments during the financial crisis in October 2008, just before the S&P fell an additional 26%.

The good news is that you don't need to be proficient at timing to succeed as an investor. Consistency over time is what truly matters.

Investing will always be a challenging process, given the conflicting realities: historically, the market trends upward over the long haul, but in the short term, volatility can create havoc.

As you strive to manage your emotions, please remember to draw from historical lessons. You can explore these valuable insights further in helpful financial resources.

market, timing, investing