It’s About Time


John Micklitsch, CFA CAIA, President & Chief Investment Officer

As the equity markets fell roughly 10% to start the year, many market doomsayers could be heard saying, “It’s about time.” While we agree with them that it is about time, we choose to associate those words with a totally different frame of reference. In goals oriented investing it is “about time.” However, the time referred to should be about time in the market, not timing of the markets. This “time in the market” mindset, and it can never be stressed enough, creates the highest probability, in our opinion, of generating positive returns and reaching your long-term goals. As the below slide from JP Morgan’s Guide to the Markets illustrates, in the very short run, stocks, bonds and the combination of the two can and do produce negative returns. However, by simply shifting the time horizon from one year to five years the degree of potential negative returns diminishes significantly. It disappears for the most part at ten years and disappears altogether with a twenty year time horizon. So time in the market, not timing of the market, dramatically increases the odds of generating positive returns from a diversified portfolio.

Another investor regret associated with time is fear of investing at the wrong time. The reality is, that given enough runway, even the most poorly timed entries into the market end up working out just fine. Allianz Global Investors circulated the following chart recently that illustrates this point. In the slide, the firm measured the total return of a $100 investment into the S&P 500 each year from 1963-2015. In the first scenario, the $100 was consistently invested on the first day of each year. The $5,300 of total capital (53 years x $100) generated a total return of $60,830. In the second scenario the $100 was invested on the best day of each year, meaning the lowest price for the S&P 500 in any given year. Under this optimistic scenario, the $5,300 generated a total return of $66,295. In the third pessimistic scenario, the $100 was invested on the worst day of the year, meaning the highest priced day for the S&P 500, yet still generated a total return of $54,464. Remarkable results regardless of whether you had good timing or terrible timing as it was the time in the market that mattered most. For those of you who are curious, had you missed the three best days in each of the 53 years while trying to time the perfect entry point, the total return generated fell off of a cliff to $2,936. The flipside, of course is what would it have earned had you avoided the three worst days in the market, but with the low probability of actually being able to consistently time those days, combined with the shortfall risk of missing the best days, scenarios 1-3, which focus on time in the market, clearly look like the highest probability paths for goals focused investors.

All too often, market pundits with little or no accountability for maximizing the probabilities of real world, goals based investment outcomes, spout off about the state of the markets essentially encouraging investors to market time. The implication is that there is easy money to be made moving your assets in and out of the market. In practice, however, this sounds to us like speeding through the parking lot of a state trooper convention. You may get through the parking lot and get to where you’re going a little faster, but chances are you’re going to get caught. So while the Mt. Rushmore tenants of successful goals oriented investing include asset allocation, diversification and security selection, time deserves to have its face on the monument too.

John Micklitsch, CFA, CAIA, is the Chief Investment Officer at Ancora Advisors LLC a SEC Registered Investment Advisor.

The mention of specific securities, types of securities and/or investment strategies in this newsletter should not be considered as an offer to sell or a solicitation to purchase any specific securities or to implement an investment strategy. Please consult with an Ancora Investment Professional on how the purchase or sale of specific securities can be implemented to meet your particular investment objectives, goals, and risk tolerances. Past performance of these types of investments is not indicative of future results and does not guarantee dividends/interest will be paid or paid at the same rate in the future. The data presented has been obtained from sources that are believed to be accurate and credible. Ancora Advisors makes no guarantee to the complete accuracy of this information. The indexes discussed are market performance indices and are not available for purchase. If you were to purchase the securities that make up these indices, your returns would be lower once fees and/or commissions are deducted. Past performance of these indices is not indicative of future results of the securities contained in these indices.

Ancora Advisors LLC is a registered investment adviser with the Securities and Exchange Commission of the United States. A more detailed description of the company, its management, and practices are contained in its “Firm Brochure” Form ADV, Part 2a. A copy of this form may be received by contacting the company at: 6060 Parkland Blvd, Suite 200, Cleveland, Ohio 44124, Phone: 216-825-4000, or by visiting our website

View All >