Why "Time in the Market" Matters More Than Timing
"Time in the market beats timing the market." It is one of the best data-supported investing sayings.
The Power of Holding 20 Years: The Change in Loss Probability
The probability of experiencing a loss by holding period, based on historical U.S. S&P 500 data: 1-year hold: a loss in about 26–28% of cases 5-year hold: a loss in about 12–14% of cases 10-year hold: a loss in about 3–5% of cases 20-year hold: historically almost no cases of loss
The longer the holding period, the more dramatically the loss probability falls. This is the data-based rationale for recommending "long-term investing." However, these figures are based on past U.S. S&P 500 data and do not apply to all markets and assets.
Beware of survivorship bias: these figures are data from the U.S. market, which survived and still exists today.
The Compounding Loss of Early Withdrawal
The compounding effect is strongest when it continues uninterrupted.
Example: 8% annual return, an initial investment of about $7,400 30-year hold: about $74,500 (roughly 10x) Withdraw after 20 years (about $61,600) + a 3% deposit for the remaining 10 years: about $82,800
Withdraw after 10 years (about $16,000) + a 3% deposit for the remaining 20 years: about $28,900
Withdrawing midway lowers the compounding base, so you give up the large growth of the later period. In particular, the compounding increase is greatest in the 10–20 year and 20–30 year segments.
The Psychological Challenge of Staying in the Market
It is clear in the data, but hard to execute.
2008 financial crisis: S&P 500 -57%. Amid forecasts that "this time is different, it won't recover," many investors sold. In reality it recovered its prior high in 2013, and by 2023 it had more than doubled that.
2020 COVID: -34% in just 33 days. Amid fears that "the economy is collapsing," many people sold. It recovered 5 months later, then surged for the next two years.
Practical ways to stay in the market: 1. Invest only an amount you can afford 2. Keep 6 months to 1 year of living expenses as a separate emergency fund 3. Reduce how often you check your portfolio 4. Know your MDD in advance and prepare psychologically
よくある質問
Q. At what age is it not too late to start?
The compounding effect favors an early start, but starting late is better than not starting at all. Starting at 40 still gives you a 20-year investment period, and starting at 50 still gives you 10 years. In the data, 10 years is already a segment where the loss probability drops sharply. There is a saying that "now is the earliest point at which you can start."
Q. How can I check the effect of staying in the market with this service?
In this service's "recurring investment simulator," try setting the S&P 500 to a 20- or 30-year period. Comparing various cases by changing the start date lets you directly see the result of long-term investing, including crashes. The results always display MDD and drawdown periods alongside.
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