Disclaimer: Views in this blog do not promote, and are not directly connected to any L&G product or service. Views are from a range of L&G investment professionals, may be specific to an author’s particular investment region or desk, and do not necessarily reflect the views of L&G. For investment professionals only.
Words of wisdom? “Time in the market beats timing the market”
Our Well-known Investment Saying Evaluation (WISE) index provides an assessment of some well-worn financial aphorisms.
The following is an extract from our research report: Do famous investment savings hold water?
“Time in the market beats timing the market” – WISE score: 13/15
Durability: 4/5
You’ve probably seen the chart ‘What happens if you miss the best 10 days in the market?’ It’s a compelling and longstanding, often used to argue that staying invested at all times is the only rational strategy.
Reliability: 4/5
But here’s what those charts don’t show you: what happens if you avoid the worst 10 days? The gains from sidestepping the worst days can be even more powerful than the losses from missing the best.
The challenge is that the best and worst days tend to cluster – often during periods of heightened volatility. That means it is very difficult, or bordering on unrealistic, to be able to navigate this mix of being exposed to the best days and shielded from the worst.
That’s where a more nuanced approach comes in. We wholeheartedly agree that long-term investing has the potential to offer benefits like compounding, reduced emotional decision-making, and participation in long-term market growth.
But that’s only half the story. We believe a robust, risk-managed and diversified[1] strategy can help reduce exposure to the most volatile periods – those very clusters of best and
worst days. This doesn’t mean trying to perfectly time the market. It means being adaptive.
Insight: 5/5
Markets evolve. So should portfolios. That can be by evolving a strategic approach over time to increase diversification, or by taking on a dynamic asset allocation approach. Dynamic approaches allow the portfolio to respond to changing conditions – shifting exposures across asset classes, regions, sectors and themes. These changes shouldn’t be driven by emotion, but by a disciplined process focused on long-term outcomes.
Whether it’s adjusting UK equity exposure post-Brexit or tilting toward emerging themes like AI, each move is designed to enhance returns or mitigate downside risk. Time in the market is important, but it’s not the whole story. The real power lies in combining long-term discipline with thoughtful adaptability.
As markets change, so should portfolios.
[1] It should be noted that diversification is no guarantee against a loss in a declining market.
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