Marking Timing: We’ve Figured It Out!
April Fools! 😊
Here’s the spoiler: We have not cracked the code on market timing. And most importantly, neither has anyone else.
While that may sound like an April Fools’ reveal, it’s actually one of the most important investment truths we can share. The idea that someone can consistently predict when to get in and out of the market (whether based on headlines, forecasts, or intuition) is not supported by evidence. What the data shows, time and again, is that market timing is unreliable at best, and harmful at most often.
The Reality: Markets Move More Than We Remember
When markets become volatile, it’s easy to feel like something unusual is happening. However, history tells a different story.
The market (using the S&P 500 for this example) experiences a decline of at least 5% in roughly 94% of years.
A drop of 10% occurs in about 64% of years.
A 15% decline happens roughly 40% of the years on record.
Those numbers may seem surprising, but here’s the key: many of those same years still end positively.
At the same time, markets (using the S&P 500 for this example, too) tend to reward patience:
About 53% of trading days are positive.
Around 62% of months are positive.
Roughly 75% of rolling one-year periods are positive.
Over 90% of five-year periods are positive.
Nearly 95% of ten-year periods are positive.
The longer the time horizon, the more consistent the positive outcomes become.
So, if markets are up “more often than not,” why not try to step out during downturns and jump back in later? This is because the most important market gains tend to happen in very short, unpredictable bursts. The challenge is that those best days often occur right after the worst ones, precisely when investors are most tempted to step aside. $1,000 invested in a hypothetical total market index a century ago would be worth $17.1 million by the end of 2025. When you look at rolling 10-year periods over the last century, patient investors who stayed in the market for a decade came out ahead in real terms (after inflation) roughly nine times out of ten. Steadfastness works.
What We Do Instead
At Woodward, we don’t attempt to predict market movements. Instead, we take a structured, disciplined approach.
When a portion of a portfolio grows meaningfully above its target, we trim it back. Not because we know it will decline, but because it has grown beyond its intended role. We then reinvest in areas that have underperformed, maintaining balance and discipline. This is rules-based and formalized in our clients’ investment policy statements, because as humans we are hard-wired to let our emotions make the (usually) wrong decisions as investors.
The Takeaway
It’s important to remember: markets will rise and fall, headlines will come and go, and predictions will always sound convincing in the moment.
But the most successful long-term investors tend to:
Accept volatility as normal. It’s the price of admission.
Avoid trying to time the market.
Stay committed to a disciplined plan.
Rely on structured processes like rebalancing.
If there’s one “secret” to investing, it isn’t predicting the future - it’s preparing for it.
If you need help preparing your portfolio for the future, reach out to the team at Woodward Financial Advisors!
Sources:
https://www.dimensional.com/us-en/insights/3-lessons-from-investings-moneyball-moment