Does time in the market really beat timing the market?

Does time in the market really beat timing the market when it comes to ASX shares? Here's a possible answer with help from Warren Buffett.

| More on:
Sydney airport share price represented by hand placing a clock into a piggy bank

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A common phrase one might hear in the course of their investing journey is the old maxim 'time in the market beats timing the market'. Whilst this proverb appears simple in nature, it is actually quite a multi-layered concept. Still waters run deep and all that.

So what does this quote actually mean? Well, on the surface, it tells us that investing capital consistently and steadily into the share market is a better strategy than trying to jump in and out of the market when you see a 'low' or a 'high'. In this way, this quote sort of goes against that other famous investing dictum 'buy low, sell high'.

But why is this the case? Surely, it's better to 'buy the dips' than just focusing on maximising the 'time in the market'…

Well, theoretically yes it is. Waiting until a quality share hits a low pricing point is a great way to make money. But theory and practice are extremely divergent when it comes to investing. See, we investors just aren't very good at the whole 'timing' thing. It's psychologically abhorrent to us as humans to sink large amounts of capital into shares when the market is selling off. Doubts start to creep in, like 'what if it drops again tomorrow?' or 'I'll just wait a little longer'. No one truly knows when the market tops out or bottoms out until after it has happened. As such, any decision to try and 'find the bottom' is actually a gamble, a bet on when you think the markets will give you the best deal. If you get this deal wrong, the consequence is usually a permanent loss of capital.

Time vs Timing

So why is time in the market so much better? Well, firstly, it's because it takes this 'guess the bottom' element out of the equation. By focusing on the long term, it's far easier to ignore the cut and thrust of the markets from day to day. Sure, it's still scary watching the value of your share portfolio fall from time to time (as we saw back in March). But today, the S&P/ASX 200 Index (ASX: XJO) and ASX shares have recovered substantially from where they were on 23 March. All you had to do to benefit from this was… give it time.

But time in the market is really about harnessing the power of compound interest. Compounding is the best thing about investing in ASX shares, and it's usually what makes investors like Warren Buffett rich. Why do you think Buffett, at age 90, is as rich as he has ever been? Time in the market of course. If you are able to achieve a consistently high annual rate of return over decades and decades, building wealth is almost inevitable. And Buffett has never tried to time a market in his life. But pushing and pulling your money in and out of the market kneecaps the compounding process. And all it takes is one massive mistime to end up back at square one.

Foolish takeaway

Long story short, I believe time in the market beats timing the market, every time. And it's easier too. What's not to like?

Should you invest $1,000 in Australia And New Zealand Banking Group right now?

Before you buy Australia And New Zealand Banking Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Australia And New Zealand Banking Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

A man sits cross-legged in a zen pose on top of his desk as papers fly around his head, keeping calm amid the volatility.
How to invest

Why market volatility is an ASX stock picker's best friend

Here's why you shouldn't fear market volatility.

Read more »

A businessman compares the growth trajectory of property versus shares.
How to invest

Why does Warren Buffett prefer shares over property?

Equities made Buffett the world's most successful investor.

Read more »

Person holding Australian dollar notes, symbolising dividends.
How to invest

Should I spend $5,000 on ASX 200 shares or ASX ETFs this month?

Where is the best place to invest these funds? Let's look at the options.

Read more »

a smiling picture of legendary US investment guru Warren Buffett.
How to invest

2 famous investors with even better track records than Warren Buffett

These two fellow Americans achieved mind blowing returns.

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
How to invest

How a beginner investor could build a $250,000 ASX share portfolio

These easy steps could help you on your way to riches in the share market.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP
How to invest

How to generate $70,000 of passive income a year from ASX shares

ASX shares could be the key to generating a big income boost. Here's how to do it.

Read more »

A sophisticated older lady with shoulder-length grey hair and glasses sits on her couch laughing while looking at her phone
How to invest

Did you buy the dip on Wesfarmers shares? You just made a motza!

Buying the dip on this ASX 200 conglomerate last month would have been a very good call.

Read more »

Warren Buffett
How to invest

What is the 'Buffett Indicator'? And what is it signalling right now?

Warren Buffett believes this tool is one of the best ways to value the market.

Read more »