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Why Time in the Market Beats Timing the Market
Investing in the stock market can often feel like an unpredictable journey. One of the most common dilemmas faced by investors is whether to try timing the market or to invest for the long haul. The evidence, however, overwhelmingly supports the idea that time in the market is more beneficial than trying to time the market.
Be sure to read to the end to see an example of why this is actually the case.
The Pitfalls of Market Timing
Market timing involves trying to predict the best times to buy low and sell high. This strategy is incredibly hard to pull off successfully, given the unpredictable nature of the stock market.
The Power of Long-Term Investing and Compounding
Long-term investing is about staying in the market, regardless of its fluctuations. This approach is based on the market’s general upward trend over time.
Compounding Returns
Investing in index funds, which mirror market indices, offers an average return of about 8% per year. These returns, when compounded, can double approximately every seven years.
