Timing the stock market is not free

The COVID-19 induced equity market crash in early 2020 and its impressive recovery has been one of the most volatile and unprecedented episodes in history. Both fear and greed were seen at extreme levels. The most risk-adverse investors finally received their validation during the crash while opportunistic traders welcomed the volatility as a chance to make big bets during the rally. A year and a half later, stocks have not only recovered but major indices have been marking new record highs (see Chart of the Week).

On the minds of investors is almost certainly what to do at this juncture. Should we be deploying cash at these levels? Or is another major correction on the horizon? For us, a more useful question to contemplate, but one that we seldom get asked, is whether these timings matter over the long run. In this week’s Musings we demonstrate that being an accurate market timer is less important than being fully invested according to plan. 

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