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Stocks Time in the Market Investing in the stock market does not depend on timing the market, but time in the market. Stock prices fluctuate from day to day, sometimes wildly. That's the nature of the stock market. While past performance does not guarantee future results, history has shown that, over the long term, stock market investing can be rewarding. The chart below shows that, historically, you have a 70% likelihood of earning a positive investment return over a one-year period, but a 30% chance of losing money. However, stretching your investment time frame out to five years increases your chance of earning a positive return to 86%. Long-term investing doesn't have to mean 50 years, either. History has shown that just five years can make a big difference. Long-term investing in the stock market has paid off historically. Here's another example: History has shown that trying to time the market is next to impossible. You don't have to be wrong often to miss out on market movements. That's why, as the table shows, it's better to stay fully invested during all market cycles. This has, historically, given investors the greatest average return by comparison. As you can see, it's time in the market that's important, not timing the market. Main point: Waiting for the "right" moment to invest in the stock market isn't going to make that much of a difference over the long term – it's more important that you begin investing. Many investors think they should wait until the "right" time to invest in stocks. However, as we all know, trying to time the market is next to impossible. In any event, trying to time the market is not really investing. It's called "trading," and very few individuals have the time, technical expertise, desire or the stomach to trade. Investing is about "time in the market," and, historically, the longer you're in the market, the greater your potential for increasing wealth. These hypothetical examples present what would have happened if two individuals invested in the stock market, as represented by the S&P 500®, in the worst and the best possible scenarios. Both scenarios assume two individuals invested $1,000 a year into the stock market, represented by the Standard & Poor's 500 Index over the 10 years ending 12/31/02. One invested on the worst day (the day the market was at its yearly high), while the other invested on the best day (the day the market was at its yearly low). As you can see at the end of 10 years, the best-day scenario has an investment value of $20,627 with an average annual total return of 8.89%. The worst-day scenario has an investment value of $16,921, with an average annual total return of 7.28%. The difference between investing on the best days and investing on the worst days was less than 3% each year during the 10-year period. While there's no guarantee that the stock market's strong performance will continue, as you can see, when they invested wasn't necessarily as important as the fact that they invested. < PREVIOUS NEXT > #40101