Apr 17

Market Timing – A Losing Game

by Patrick Rohe, CFP®

The stock market crash of 2008-2009 is a very recent memory for many investors who still bear the scars from the experience. At Rockbridge, we also have prospective clients who walk into our offices saying that they haven’t recovered yet from the financial pain their portfolio endured over those several months.

Why? It’s usually a combination of some or all of the following factors:

“More money has been lost trying to anticipate and protect from corrections than actually in them.”

– Peter Lynch, renowned Fidelity fund manager –

The last 10 years haven’t given investors the risk-appropriate returns they deserved (a 50% stock and 70% stock portfolio basically had the same 10-year result), but if you stayed the course, you’re certainly not “still recovering” from 2008-2009.

For example, a $100,000 investment (50% stocks and 50% bonds) at the market peak at the end of 2007 returned to $100,000 only 13 months after the market bottom, as shown by the graph below. This is not something we want to experience again, but certainly a result most investors could live with given the circumstances.

Now, how do you accomplish that result?

“The investor’s chief problem and even his worst enemy is likely to be himself.”

– Benjamin Graham, “The Father of Value Investing”

We can’t predict or control what the crowd will do in the financial markets we are seeing today, but we can increase our odds of a successful outcome by controlling the aspects of investing that can be controlled: diversification, asset allocation, costs and discipline.

We might see a period of negative stock market returns in 2017, but we don’t know. All we do know is that the best way to guarantee underperforming the market is to not be invested in the market, so our answer is to stay the course and periodically review your portfolio with us to be sure the level of risk you are taking is appropriate for your specific goals.

Screen Shot 2017-04-17 at 9.56.51 AM

About the Author

Patrick Rohe CFP is a Certified Financial Planner at Rockbridge. “Upon graduation from Cornell University, I was recruited by a large brokerage firm. After months of sales training and minimal help in understanding even the basics of investing, I quickly learned that the brokerage firm model was not for me. I then made the transition to Rockbridge, a fee-only financial planning firm, where I truly enjoy helping people and making a difference in their financial lives!”. Patrick is a graduate of the Applied Economics and Management and Animal Science (B.S.), Cornell University, and the CERTIFIED FINANCIAL PLANNER™, (CFP®) program. Learn more and/or Contact Patrick.


You Might Also Like

Other articles filed under Investing

The ABC’s of Behavioral Biases: F-H

November 22, 2017
Let’s continue our alphabetic tour of common behavioral biases that distract otherwise rational investors from making best choices about their wealth. This week, we’ll tackle: fear, framing, greed and herd mentality. FEAR What is it? You know what fear is,...
Continue Reading

The ABC’s of Behavioral Biases: A-F

November 16, 2017
Welcome back to our “ABCs of Behavioral Biases.” Today, we’ll get started by introducing you to four self-inflicted biases that knock a number of investors off-course: anchoring, blind spot, confirmation and familiarity bias. ANCHORING BIAS What is it?  Anchoring bias occurs...
Continue Reading

The ABC’s of Behavioral Biases: An Introduction

November 7, 2017
By now, you’ve probably heard the news: Your own behavioral biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that...
Continue Reading

Market Commentary – October 2017

October 23, 2017
Stock Markets Equity market returns over several periods ending September 30, 2017 are shown on the graph to the right. Here are a few highlights: Stocks provided above-average returns over the past quarter – REITs lagged. Non-domestic markets led the...
Continue Reading

Dow 22,000 – Why We’re Here and What It Means

October 20, 2017
On August 2, 2017, the Dow Jones Industrial Average set a record, closing above 22,000 for the first time. People will debate the cause of the rally and how long it will last, but there is only one answer that...
Continue Reading

‹ Back to Blog Home

getting started is simple

315.671.0588 info@rockbridgeinvest.com Schedule a meeting Sign Up for Our Newsletter