What is the difference between Time in Market or Timing the Market?

‘Time in market’ refers to a long-term investment strategy that involves staying invested in the stock market over a period of years or decades. This approach assumes that the stock market will trend upwards over time, and that the best way to benefit from this long-term trend is to stay invested in the market, regardless of short-term fluctuations in stock prices. The goal of this approach is to achieve a steady rate of return over the long term.

‘Timing the market’, on the other hand, refers to a short-term investment strategy that involves trying to buy and sell stocks at the most opportune times in order to maximise returns. This approach assumes that the stock market is volatile and that stock prices are influenced by a variety of factors such as economic conditions, geopolitical events and market sentiment. The goal of this approach is to achieve high returns by buying stocks when they are undervalued and selling them when they are overvalued.

The key difference between the two approaches is the time horizon of the investment strategy. ‘Time in market’ is a long-term strategy that focuses on achieving a steady rate of return over a period of years or decades, while ‘timing the market’ is a short-term strategy that focuses on achieving high returns by buying and selling stocks at the most opportune times. It rarely works.

Overall, while both approaches have their advantages and disadvantages, many financial advisers recommend a ‘time in market’ approach for most investors, as it is generally considered a more reliable and less risky strategy for achieving long-term investment goals.

Article is accurate at date of writing.