What Is Market Timing?
Attempting to predict market movements and buy/sell accordingly.
The Full Definition
Market timing is the strategy of moving in and out of the market based on predictions about future price movements. Research consistently shows that even professional fund managers cannot reliably time the market over long periods. Missing just the 10 best trading days in a 20-year period can cut your total return nearly in half. The consensus among long-term investors: time in the market beats timing the market.
Real-World Example
A study of S&P 500 returns from 2003–2022 found that an investor who stayed fully invested would have earned ~10% annualized. Missing the 10 best days reduced that to ~5.5%. Missing the 20 best days dropped it below 2%. The best days often follow the worst.