Don’t wait for the perfect moment: The importance of simply being invested

For anyone who wasn’t invested ahead of a period of strong market performance, it can be tempting to believe the “right moment” has already passed.

Questions about whether it’s still a good time to invest are common, but focusing solely on market timing is more likely to lead to fresh missed opportunities. Successful investing involves much more than predicting market movements; it requires discipline, long-term planning, and time-tested strategies to help manage risk.

The risks of trying to time the market
Market timing refers to trying to predict future market movements and making buy or sell decisions based on those predictions. While the idea of buying low and selling high is appealing, even experienced professionals acknowledge that accurately timing markets on a consistent basis is extremely difficult.

A key challenge is that a large share of a market’s gains in any given year often occurs in a small number of the market’s strongest days. Those days frequently occur during periods of heightened volatility, which makes them almost impossible to predict. Missing out on them can have a meaningful long-term impact on investment outcomes.

Why being (and staying) invested matters
One of the biggest reasons to stay invested is the power of compounding. Compounding occurs when your returns generate their own returns, creating a snowball effect over time. The longer you stay invested, the more this effect works in your favour.

Financial markets have historically trended upward over long periods despite shorter-term periods of volatility or declines. Investors who stay invested and follow a consistent strategy across their investment timeframe are more likely to benefit. Trying to time entry and exit points can increase the risk of missing important periods of market growth.

The role of dollar cost averaging
Dollar cost averaging (DCA) is one simple and effective strategy to help reduce the risk of unfortunate timing. It involves investing a fixed amount at regular intervals regardless of market conditions. By doing so, you spread your investments over time and reduce the impact of volatility.

For example, if you invest the same amount each month, you automatically buy more units when prices are low and fewer when prices are high. This helps smooth out market fluctuations and reduces the emotional decision-making that often leads to poor investment outcomes. It’s similar to how regular KiwiSaver contributions work.

Benefits of dollar cost averaging:

• Reduces the impact of volatility
• Promotes disciplined investing
• Helps remove emotion from investment decisions

The only real downside is that DCA may not maximise returns in a consistently rising market. But given that volatility is a normal part of long-term investing, DCA remains a valuable strategy for many investors.

Focus on long-term goals
Investing should be viewed as a long-term journey, not a series of short-term bets. It’s completely natural to feel regret after missing a period of strong market performance, but markets move in cycles and opportunities arise over time.

Instead of focusing on timing, aim to invest in a diversified portfolio that aligns with your risk tolerance, timeframe, and goals. Diversification helps reduce risk and can support more stable long-term outcomes.

Final thoughts
While it’s tempting to wait for the “perfect” moment to invest, the reality is that perfect timing is only obvious in hindsight. The longer you’re invested, the more opportunity you have to benefit from compounding returns.

Strategies like dollar cost averaging can help reduce timing risk and support consistent investment habits.

It’s time in the market, not timing the market, that supports long-term success. Stay disciplined, stay focused on your goals, and give your investments the time they need to grow.