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Retirement Plan

The Risks of Trying to Time The Markets

by Richard (Rick) Childress, CIMA , CRPC .
®
®
First Vice President. PIM Portfolio Manager
®
iming is everything – In The News
whether it’s navigating Markets fluctuate greatly and interest rates rise and fall,
Ttraffic to get to work on but outside factors like politics and international trade can
time or getting a table at a popular also affect investment returns monthly, weekly, even daily.
restaurant. If you miss the window, Predicting change is really just guessing. Diversification
you might end up stuck in traffic or in investments can be a better overall strategy, limiting
waiting in line longer than you’d exposure and risk by building your portfolio to address
like for dinner. Timing can be tricky your short-term and long-term goals. As life changes
for everyday activities, and it’s even with marriage or divorce, a new baby, a new job or even
more challenging when it comes to retirement, it’s important to review your financial goals.
the markets. If your timing is off The Bottom Line
with the markets, research shows it I believe the best strategy to help manage your risk is to
could cost you. It’s a significant risk. avoid trying to time the markets and remain fully invested
Making the Right Call throughout a complete market cycle, rather than attempting
For some investors, timing the market is like calling to time the market by buying and selling to avoid
the right play in football: if you do it right, the risk could volatility or capture significant gains. It’s also a strong
be worth the reward. However, if your timing is off, you recommendation to consider rebalancing your portfolio,
could end up getting sacked. Missing even a handful of the buying asset classes that have fallen below a portfolio’s long-
market’s best days can dramatically cut your investment term allocations and selling those that are higher, while
returns. Conversely, missing several of the worst days in staying fully invested. Regular rebalancing can lead to more
the markets can potentially offer higher returns, but the consistent returns and again manage your risks, something
strategy behind trying to miss the bottom of trading can be we always want to do. The markets are never a completely
challenging. smooth ride, but some simple strategies can help reduce
Historically, missing just 10 of the best days in the losses and help you maintain performance in the long-term.
markets, a very small amount over a 30-year period, would 1 – Source Bloomberg and Wells Fargo Investment
have dropped your annual average rate of return from 8% to Institute data, February 1994 through January 2024 for
5.26%. Missing 30 days and the drop would have been even the S&P 500 Index. Best days are calculated using daily
more steep to near 1.8%. If you missed 40 days, the drop returns. An index is unmanaged and not available for
would have been even more to .44%. Change that to a 50 direct investment. A price index is not a total return index
day miss and your annual return would have hit a negative, and does not include the reinvestment of dividends. Past
-.86% annually.¹ performance is not guarantee of future results.

Wells Fargo & Company and its affiliates do not provide legal or tax advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this
information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed. This article was written by
Wells Fargo Advisors Financial Network and provided courtesy of Richard, Childress CIMA®, CRPC®, PIM® Portfolio Manager, First Vice President in Naples at 239.264.1000 [If there is a charge to publish,
produce, or distribute an article, use the following disclosure instead of the above:] This advertisement was written by Wells Fargo Advisors Financial Network and provided to you by Richard, Childress CIMA®,
CRPC®, PIM® Portfolio Manager, First Vice President Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Agape Wealth Partners of
Edwards Asset Management is a separate entity from WFAFN. ©2024 Wells Fargo Advisors Financial Network, LLC. All rights reserved. First Clearing is a trade name used by Wells Fargo Clearing Services,
LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.
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