Your Timing Could Be Lousy

Even Warren Buffett, who is arguably the most famous investor in America, doesn't try to time the market. "Nobody succeeds long-term in the market jumping from flower to flower," he was once quoted as saying. "The important thing is to be in the right companies. It would be wonderful to be in and out at the right time, but nobody I know can do that." The chart below demonstrates his point.

The Strategy:

Actually a low-stress alternative to market timing does exist. With dollar-cost averaging* (*Dollar cost averaging doesn't assure a profit or protect against loss in declining markets. It involves continuous investment in securities regardless of their fluctuating price. Investors should consider their financial ability to continue purchases in periods of low price levels.) you don't worry about when to invest. You just do it automatically, on a regular time frame.

With dollar-cost averaging you invest a certain amount of money each month or quarter. Consistency is the key. Waiting for the stock market to settle down may mean missing out on opportunities for growth.

During down markets, your money will buy shares of a mutual fund, for instance, at a less expensive price while your contribution will buy less during a raging bull market when stock prices may be higher.

Dollar-cost averaging gives people the courage to invest in volatile markets and helps make them more disciplined.

The best way to force yourself to save this way is with an automatic withdrawal program typically linked to your checking account. The money is transferred to a mutual fund or a financial institution.

If your portfolio matched the S&P 500*, look what would have happened if you, in an attempt to time the market, had missed some of the best days on Wall Street of this 10-year period.

The S&P 500*
Annualized Return

Investment Status	Annualized Return
Fully invested	18.50%
Missed Best 10 Days	14.26%
Missed Best 20 Days	11.46%
Missed Best 30 Days	09.06%
Missed Best 40 Days	06.91%
(12/31/87 to 12/31/97)

* The Standard & Poor's 500 Index is an unmanaged list of 500 common stocks and is a commonly used benchmark of U.S. stock market performance. Indexes assume reinvestment of all distributions and don't take into account brokerage commissions or other costs. It isn't possible to invest directly in an index. Past performance isn't indicative of future results.

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