Time horizon and volatility

"Time in the market beats timing the market" survives as a cliché because the evidence behind it is unusually strong.

Why timing fails

To time markets you must be right twice - when to leave and when to return - and the best days for returns cluster remarkably close to the worst ones, often within the same volatile weeks. Investors who exit during a fall overwhelmingly re-enter after the recovery has already happened. Missing a small number of the strongest days over a long period materially reduces total returns.

Meanwhile the cost of being invested during a fall is temporary, provided you do not sell.

Regular investing removes the decision

Pound-cost averaging - investing a fixed amount on a fixed date - means you automatically buy more units when prices are low and fewer when they are high, and you never have to decide whether today is a good day. Lump sums invested immediately have historically produced slightly higher average outcomes, but regular investing is what most people can actually sustain, and sustainability is the point.

Drawdowns are the normal price

Significant drawdowns happen regularly in equity markets. A fall of 10% or more occurs frequently; falls of 30% or more have occurred repeatedly across history and will occur again. Expecting them in advance is what allows you to hold through them.

Write down, while markets are calm, what you will do when your portfolio falls by a third. The answer should be "continue contributing".

Horizon dictates everything

Over one year, equity returns are close to unpredictable. Over twenty, the range of historical outcomes narrows dramatically. Your time horizon, more than your fund choice, determines whether investing is appropriate at all.