Psychologie a chování
Investment Mistake of the Month: Waiting for a Dip That Never Comes
Key takeaways
- Market timing — waiting for a dip and buying at exactly the bottom — on average reduces returns compared to regular investing.
- The market spends most of its time at or near all-time highs — waiting for a dip means missing out on returns.
- Data shows that even the worst timing (always buying at the peak) beats not investing at all over a 20-year horizon.
- The best strategy is regular investing regardless of the "right moment".
Waiting for a market dip before starting to invest is one of the most widespread and costliest investment mistakes — it costs on average hundreds of thousands of crowns over a long horizon.
Why we do this
Our brains cannot make us buy when markets "look expensive". Research by Kahneman and Tversky showed that losses hurt roughly twice as much as an equivalent gain feels good. The result: we prefer not to invest and wait for a "safer" entry. This feeling is natural, but it is devastating for your investments.
What the data says
A Charles Schwab study compared five strategies over a 20-year horizon (S&P 500):
- Perfect timing (always bought at the bottom): ~$151,000 from $2,000/year
- Investing immediately every January: ~$135,000
- DCA averaging throughout the year: ~$134,000
- Worst timing (always bought at the peak): ~$121,000
- Not investing, staying in cash: ~$44,000
The difference between perfect and worst timing is ~25%. The difference between worst timing and not investing is ~175%. Being in the market is more important than when you enter.
Why timing does not work even for professionals
The SPIVA database shows every year that ~80–90% of actively managed funds underperform their benchmark over a 10-year horizon — and these are professionals with entire teams of analysts. An individual investor with limited information and emotions has an even smaller chance. See also active vs. passive investing.
What to do instead of timing
Invest regularly regardless of the "right moment" — DCA (dollar-cost averaging) automatically buys more at low prices and less at high prices. Set up an automatic order, ignore the news, and let compound interest work. Every month of waiting is a month of missed return that you cannot recover.
FAQ
What is market timing?
Trying to buy investments at the best (lowest) price and sell at the peak. Attractive in theory, ineffective in practice — even professional funds cannot do it systematically. Data repeatedly shows that regular investing beats market timing.
What if I enter just before a crash?
According to the data, even an investor who always buys at the peak (worst possible timing) beats not investing at all over a 20-year horizon by ~175%. A short-term loss is less harmful than years of missed compounding.
How do I get rid of the fear of buying at "overvalued" prices?
Shift attention from price to process. Set up an automatic regular order (DCA) and stop trying to manage the situation actively. Realise that the feeling of "the market is expensive" is almost constant — markets historically grow almost all the time.
When is the right time to invest?
As soon as possible. And then regularly. Every further delay extends the time out of the market, which cannot be recovered. Research repeatedly confirms that "time in the market beats timing the market" — being in the market is more important than when you enter.