Here’s an email I received in the AskDavis@ParadigmPressGroup.com inbox:

My wife and I average 70 years of age, just a few years apart. We've each been drawing Social Security since turning 64. I am fortunate to be working part-time at a job I can hopefully continue for a few more years. She's been retired for 8 years.

We have little more than a half million dollars in net worth, more than half though is the equity in our home. In mid-Q4 this year, we subscribed to both Jim Rickards' Insider Intel and The Maverick. Our retirement funds are modest, in part, because we invested nearly $200k in a junior mining company's shares that have lost us over 90% of our investment made between 2006 to 2016, but we retain those shares to this day.

Until very recently, we had been very cautious where we placed our IRA and 401k funds, missing out on this remarkable bull run because we lost a fifth in 2022. Are we repeating our pattern of mistiming by becoming more aggressive this late?

Signed, An Embarrassed Investor

First, thank you for sharing your story. This is certainly nothing to be embarrassed about as it takes courage to lay out your financial journey (including the missteps) in such detail.

I imagine your email will resonate with many readers, as timing the market is a challenge even for the most seasoned investors.

You ask an important question: “Are we repeating our pattern of mistiming by becoming more aggressive this late?”

My answer lies in a principle that has guided countless successful investors: time in the market beats timing the market.

The Market Rewards Patience

Check out this chart by Ben Carlson:

Here’s how to read this chart:

Pick any year across the top to start, then go down any number of years and the corresponding square will tell you the annualized return from that starting point.

For example, the 5-year annual return starting in 1993 was 20% per year.

There is plenty of green in this chart, indicating positive returns, as well as a few painful periods.

It’s important to note there are no losses going out 11 years or more. Meaning that if you kept your money invested for 11 years at any point over the last 30 years, you made money.

This is despite the Dot.Com bubble, the Great Financial Crisis, and more.

On the other hand, there were shorter periods – 2, 3, and 5 years – where returns were negative.

Five years can feel like an eternity in the stock market, but over longer periods, the odds of positive outcomes increase significantly, and the range of potential returns narrows.

• Over a 5-year time horizon, returns ranged from -2% to 29% annualized.

• Over a 10-year time horizon, returns ranged from -1% to 17% annualized.

• Over a 15-year time horizon, returns ranged from 4% to 14% annualized.

The longer you stay invested, the less likely you are to experience losses, and the more predictable your returns become.

Move Forward with Confidence

It’s natural to feel like you missed the boat when you see the market’s recent bull run and compare it to the losses in your portfolio.

But here’s the truth: there is never a perfect time to invest.

Even in years where the market is roaring, downturns and corrections are inevitable. Consider the last 30 years:

• The Dot-Com Bubble.

• The Great Financial Crisis.

• COVID-19 market panic.

• The Long-Term Capital Management fiasco.

• Double-digit corrections almost every other year.

Yet, the average annualized return over that time was around 10% per year.

That’s the long-term average, and it held despite some of the most challenging economic periods in modern history.

By focusing on what you can control – your time in the market, diversification, and discipline – you can turn past challenges into a foundation for future success.

No one can predict exactly how the next decade will unfold, but I am confident there will be plenty of risk, downturns, geopolitical crises, scary headlines, and economic contractions.

Instead of dwelling on past missteps or trying to time the market, commit to a disciplined approach that allows your wealth to grow steadily over time.

I hope this helps.

Thanks for the email.