Why Time in the Market Wins Every Time

By Zach Bainter, CFP®
01/06/2021
Email: zach@gerberkawasaki.com
Twitter: zvbfor3
LinkedIn: zacharybainter

Last year - 2020 - is a year that will be remembered universally. The pandemic affected everyone and everything. There were many shocks and surprises, as well as predictions about the future. We simply were in unprecedented times last year. The stock market’s swift decline in March was one for the history books. Some were calling for the second coming of the Great Depression - an event that would dually impact the stock market and the economy. While the economy certainly is suffering a prolonged downturn and slower recovery, the stock market rebounded relatively quickly and continues to hit record highs as I write this article. Some say the market is overvalued and is reminiscent of the tech bubble in the 1990s - others say the best days are yet to come and that there is exciting new technology and companies innovating unlike ever before. There are so many competing outlooks, especially surrounding such an impactful and universal event, which ones should an investor believe?

The whole premise around investing involves an exchange - a buyer and a seller. Simultaneously, someone believes in making an investment while someone else believes in selling that same exact investment. There have always been competing thoughts and actions that feel like they were exacerbated of late. Timing the market is hard and much evidence points to the fact that it is near impossible to do consistently. Many humans think differently and most end up losing a lot of money. Time IN the market is a different approach. That is, one tried and true investment philosophy that just simply works. How many of you panicked in March - the worst month since 1931 - and sold investments? How many of you stuck to your investment plan, which might have included continuing 401(k) contributions, and rode out the immense volatility? For those that tried timing the market and sold, it is likely you stayed out of the stock market and bought at higher prices than what you sold at. For those that did not try timing the market, you are now seeing your portfolios hit all-time highs.

Predictions about the world and especially the stock market’s direction are hard to make with continued accuracy. Leading up to the election with the polls pointing to a Biden victory, many conservatives and liberals alike said an elected Democratic President will make the market go down. In fact, what happened was a rally that saw the stock market climb +10% as I write this. Again - timing the market is hard. Those that do tend to leave gains on the table. Establishing an investment plan and sticking to it despite all the noise is easier said than done but an approach that has historically worked.

This year - 2021 - is certainly one that will also have its own unique set of surprises and circumstances. Financial planning is personal, and your plan should be unique to you. Ideally your investment portfolio is diversified to help mitigate risk when volatility strikes but also capture gains when the market appreciates wildly. Investors can only control what they can control, and they should allow their investments to stay the course even if their emotions tell them otherwise.

Time IN the market, not timing the market is a wealth building mantra that is worth repeating over and over again. No one can consistently predict all of the stock market’s movements, but everyone has the opportunity to stay invested and ride out the volatility (and even hopefully make some contributions when the outlook is darkest).


Zachary Bainter is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $1.6 billion in assets under management as of 01/01/21. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”