An investor can adopt a buy-and-hold strategy or time try to time the market. Adam Fleck, Morningstar’s Director of Research, reported findings from a study on market returns. One segment of the study focused on the buy-and-hold strategy, while the other examined stock valuations to determine optimal investment timing and when to hold cash. The results were that the buy-and-hold approach outperformed value investing.
From the article: ”To address this question, we calculated the returns of two portfolios, developed over time through consistent income. The first, a Steady Equity approach, invests all income into the Morningstar US Market Index. The second, Valuation Aware, invests in the same index when stocks appear undervalued but is prepared to hold cash until a more favorable investment opportunity arises.
What did we discover? In summary, while the aggregated fair value estimates from Morningstar equity analysts demonstrated some predictive capability, maintaining a buy-and-hold strategy, regardless of market conditions, yielded superior returns over the past 21 years—albeit by a narrow margin of approximately 0.76% per year. This resulted in a portfolio value of $889,000 by the end, compared to $809,000 for the Valuation Aware strategy.”
Does anyone know of any studies showing the opposite?
https://www.morningstar.com/portfolios/staying-invested-beats-timing-marketheres-proof