Waiting for the Perfect Moment to Invest? History Says That Could Cost You.

The S&P 500 index (SNPINDEX: ^GSPC) has put up an average total return of 15.7% per year during the past decade. From a historical perspective, this is exceptional. It's worth noting that this figure includes every crash that has occurred along the way.

The path is never a smooth one. Since October 2016, the benchmark has suffered five corrections, meaning drops of 10% to 20% from a recent record high. It has also endured two bear markets, or declines of more than 20%.

Consequently, many investors believe waiting for the right moment is the smart move. After all, there is always fear, uncertainty, and doubt. Something always looks ready to break.

But the right moment never announces itself. And waiting for the perfect time to invest in the stock market is a losing game. History says it could cost you.

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Don't try to time the market

It's probably true that every investor wants to buy low and sell high. This is one of the most popular investment sayings. The goal is to avoid the downturns, and capture the rallies. It all sounds so easy.

But the market's best days tend to happen close to its worst ones. Investors who sell at the right time in a panic then need to correctly figure out when the rebound will happen. That's an impossible game.

Look at the numbers. The S&P 500 index produced a total yearly return of 10.3% from 1995 to 2025. Missing just the 10 best days would shrink that performance drastically to 7.4%, resulting in an ending sum that was 56% less than had you been fully invested. Those 10 days represented a minuscule share of all trading days during that time. You would be better served staying still.

Frequent trading makes things worse. Your decisions have to be right much more often than they are wrong. It's not worth the risk. Most active retail traders lose money.

Compounded returns are powerful

Investors need to understand that time in the market is what matters most. In other words, compounding is the driver behind incredible stock returns. Warren Buffett knows this. His net worth is $151 billion right now. Virtually all of that was earned after he turned 65 years old.

That's because compounding is back-heavy. Gains generate their own gains, and the snowball adds up in the later years. A hypothetical $10,000 capital outlay growing at 15% per year would be worth $662,000 after 30 years. The final five years, though, contributes about half of that ending dollar figure.

Taxes also can't be ignored. Being patient and letting compounding work means that money that would have gone to the government stays invested and keeps growing. This is an underappreciated reality.

Charlie Munger's wisdom should be highlighted here. "The first rule of compounding is to never interrupt it unnecessarily," he is known to have said. That philosophy worked well for Berkshire Hathaway, whose share price has risen by almost 20% annually for six decades.

Be a constant buyer of stocks

Imagine yourself decades into the future. There's almost a 100% chance that you'd wish you started investing money in the stock market earlier. Time is arguably the most important variable to long-term investing success.

Moreover, putting money to work often is also an impactful strategy. Called dollar-cost averaging, it means to allocate a fixed amount on a set schedule, like monthly or quarterly, regardless of what the market is doing or what the headlines say.

It helps to build a consistent habit of investing. And it completely eliminates the urge to try and time the market. You replace emotional decision-making with a proven method that prioritizes consistency. Over the long run, this playbook will work.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.