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It's Time, Not Timing, When Investing Graig Ponthier Executive Vice President, United Shareholders Services, Inc. |
When it comes to investing, everyone wants to know when is the best
time to buy a particular security or mutual fund. In times of volatile
markets, some investors pull out of the market and wait for the right
time to get back in. This activity, known as market timing, could cost
overall investment returns. While trying to time the markets, you
could miss some of the markets’ best days. The more you try to time
the markets, the more chances you have of missing the biggest
single-day performances.
For example, if you had invested $10,000 in the Dow Jones Industrial Average – an index of 30 “blue-chip” U.S. stocks that represents diverse market indicators but is not actually an investment vehicle – on July 1, 1995, your average annual return for the five-year period ended June 30, 2000, would have been 18.06 percent. Your investment would now be worth $22,932. Suppose you decided to get out of the market and put your money in the following day in an attempt to time the market. If you missed the 10 best market days during the same five-year period, your investment return would have decreased to 9.48 percent, with a market value of $15,729. Missing the best 20 days would lower your investment return to 4.14 percent, or a value of $12,249. Missing just a few good days can cost your overall investment return substantial growth. Don't Miss the Market Dow Industrial 7/1/95 - 6/30/00 Missing the best market performances can cost overall returns. 
Unfortunately, no one – including so-called stock market experts – has been able to
consistently predict the market. So it is important to remember your financial goals.
Also keep in mind that time, not timing, is your best ally when investing.
Time is also important for retirement planning. Delaying the establishment of a retirement savings plan can also be costly. The longer a person waits to start a retirement plan, the larger the amount of monthly savings needed in order to reach a desired retirement goal. In fact, waiting just five years can increase your required monthly investment by 50 percent. Wait 10 years and you would need to contribute twice as much. |
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Price of Procrastination Waiting on starting a retirement savings plan increased the amount of monthly savings needed for your retirement goals: 
* This hypothetical example assumes an 8% annual return, with earnings spread equally
over 12 months. The example also assumes that monthly contributions were made at
month end. Your actual return may be more or less than this amount. No investment program
can guarantee a profit.
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| To calculate your own estimated future financial needs and expected returns, visit our website at www.usfunds.com and use the asset allocation tool and retirement planning worksheet or call an investor representative at 1-800-US-FUNDS. |
