Why Time in the Market Matters

Why Time in the Market Matters

Investing can feel like a rollercoaster, but history proves that staying in the market beats trying to time it. Long-term investing—particularly with index funds—has consistently outperformed actively managed strategies while keeping costs lower. Let’s break down why time in the market matters and how sticking to an index strategy can grow your wealth over time.

1. Index Investing vs. Active Management: The Numbers Don’t Lie

Over the years, data has shown that index investing outperforms most actively managed funds. Here’s a look at average annual returns from 1990 to 2024 in 5-year increments, comparing actively managed funds to a simple index portfolio:

As you can see, index investing consistently delivers higher returns than actively managed funds. This is largely because active fund managers struggle to beat the market after fees and expenses.

2. The Hidden Cost of High Fees

One major advantage of index investing is low fees. Actively managed funds typically charge fees in the range of 1.5% to 2.5% annually, while broad-market index funds often charge less than 0.5%. Here’s what that means for your portfolio over 30 years:

That’s a $515,765 difference, all due to fees! Keeping investment costs low is one of the most effective ways to maximize long-term returns.

3. The Power of Staying Invested

Trying to time the market is nearly impossible—even the best fund managers get it wrong. Studies show that missing just a few of the best-performing days in the market can significantly impact your overall return. Take a look at what happens if you miss the best 10, 20, or 30 days over a 30-year period:

Missing just 10 days can reduce your final portfolio value by over $400,000! This is why it’s critical to stay invested, regardless of short-term market swings.