Why timing the stock market is a bad idea

Timing the stock market is a tale as old as the stock market itself. But even though it’s still a fairly common practice, that doesn’t mean it’s advisable. While timing the market in day trading can potentially result in some wins, it’s also likely to result in even bigger losses. Here’s what you should know about timing the market and why it’s typically not a good idea.

What does it mean to time the stock market?

If you’re looking to make money off the stock market, there’s a general concept to follow: “Buy low, sell high.” But even if you follow this strategy to a T, predicting the optimal “low” and “high” points is no easy task. Some market experts dedicate their entire careers to pulling off such a feat – and even then, they may be hard-pressed to surpass the average S&P 500 return.

Following this, timing the stock market is exactly what it sounds like: Investors try to predict when a share price will be at its lowest so they can buy in, and then try to predict when it will hit its highest point so they can sell it at a profit. The goal, of course, is to get big profits and beat the average annual return.

There are many different ways to (try to) time the stock market. Some day traders study past market data to try and identify trends within particular stocks or asset classes. Others make their forecasts based on company success.

Still, timing the market is far from an exact science. In many cases, trading decisions are made based off premonitions or knee-jerk, in-the-moment feelings.

A prime example of this is the rise of “meme stocks” – in other words, stocks that have gained traction because they went viral online. Share prices of meme stocks are driven by social media hype – or hivemind – rather than company reputation or success. Timing a meme stock may prove even trickier than the average stock as well. In many cases, the share prices of meme stocks can come crashing back down just as quickly as they take off.

Is timing the stock market ever successful?

The fact remains that guessing the lowest low point and highest high point is almost always going to be impossible. It may be something you manage to pull off once or twice, but attempting to do it on a regular basis is why many day traders underperform the market.

But one way investors may be able to time the market is to shoot for smaller wins rather than a jackpot. And while keeping that “buy low, sell high” mentality and buying in during small market dips may sometimes generate success, principal can still be lost, underscoring how risky trying to time the market is. For inexperienced investors, this practice is often riskier still given the complexity and uncertainty that trying to time the market entails.

The benefits of staying invested over the long term

There are a couple of reasons why it’s more advisable to invest for the long term rather than trying to time the market in the short term.

For one, short-term stock trading costs you in taxes. Generally, if you own shares for one year or less and sell them, any profit you make on them is taxed as short-term capital gains – much like regular income. This income could push you into a higher tax bracket or even make you ineligible for certain tax deductions and credits.

Another reason is that it’s simply hard to beat the 10.3% average annual return generated by the stock market as of May 2025, represented by the annualized returns of the S&P 500 over the past 10 years. However, nothing is guaranteed in the stock market, and a year is still a short time to measure how quickly you’re reaching your long-term goals.

The bottom line

The difficulty in timing the market and risk of large losses make it a less than ideal strategy for helping you to reach financial goals. As an investor, time in the market is more likely to lead to success than timing the market. To learn more about building a long-term investment strategy that works for you, connect with a J.P. Morgan advisor today.

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