5 common investing myths | Vanguard

You need a lot of time to research stocks and make frequent trades

Investing isn’t supposed to be flashy or exciting like a casino. The truth is, investing the right way is actually a little bit boring. Once you’ve put your investing strategy in place, there shouldn’t be a lot of day-to-day activity. You should just need to check in periodically and make any adjustments needed to keep your plan on track.

Time spent researching stocks, making frequent trades, and trying to time the market rarely has the return on investment some might expect. In fact, the odds are against you when it comes to market-timing. Dr. H. Nejat Seyhun determined that an investor’s odds of perfectly timing the market just 50% of the time were 0.5 raised to the 816th power.* In other words, virtually zero.

While timing the market doesn’t produce returns, time in the market is essential to producing returns.

If you’d invested $1,000 in an index fund that tracked the S&P 500 on January 1, 1980, and didn’t touch it, you’d have had nearly $70,000 by 2020. But if you pulled your money out of the market a handful of times and accidentally missed the 5 best days of market returns during that period, you’d only have $43,000. You’d have lost out on $27,000 just for missing those 5 days. Instead of asking when you should buy and sell, ask yourself if you’re invested appropriately for your financial goals and if you’re saving enough on a regular basis.

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