When To Buy Stocks (Timing The Market Perfectly)

the best time to buy stocks is at regularly timed intervals and I've shared all the data to back it up in this video with the market at all-time highs and everybody talking about a pending recession it can be scary to get into the market right now there's lots of theories and advice on how you should invest and there's no shortage of random people on YouTube telling you what to do with your money but there's really nothing like data to tell you what is the best strategy if I'm looking to invest my money in the best way possible I want a strategy that has been proven that it works by the data and that's why over the weekend I ran some numbers on some historical stock market data to test three different market timing strategies and yes that is how I spend my weekends using historical stock market returns from 1988 to 2019 I calculated what would have happened to your money in three different scenarios one where you times the market perfectly and you bought at exactly the right times and then another where you tried to time the market but you failed miserably and bought at exactly the wrong times and finally a scenario where you didn't bother trying to time the market at all and instead you invested at regular intervals the entire time in the first scenario you would have bought at exactly the lowest of the lows right after three market crashes the 2000 com bubble bursting in 2000 and then we saw the financial crisis in 2007-2008 and then in 2018 sort of towards the end of the year we saw a mini crash so in my spreadsheet I tested what would have happened if in the first scenario you would have completely avoided the crash and gotten in right at the bottom the second scenario you would have bought right at the top right before the crash so you got in at the worst price and then in the third scenario you invested at regular intervals the entire time crash or no crash and let me tell you the results are shocking so the vast majority of people make investing decisions based on emotions but with this study now you can be different from everybody else you're gonna know how to look at data and make investment decisions based on what the numbers say and not what some random person on YouTube tells you what to do so if you want some data back to insides on how to handle your investments given where we are in the market cycle as well as find out when is the best time to buy stocks then keep watching okay so here's the lowdown on the study I I took the monthly returns of the S&P 500 over a 31 year period from 1988 to 2019 then I assume that each investor saved $500 a month every single month for those entire 31 years in the first scenario where you had perfect market timing you would have always waited to buy your stocks right at the very lows of the market after any one of those three crashes the 2000 2008 and 2018 crashed and whenever you were waiting for that perfect time to buy you saved up your $500 a month in cash which would then pile up so you could deploy when it was time to buy and if you had invested like this you would have ended up with 1 million two hundred thirty five thousand seven hundred sixty dollars and ten cents at the end of those 31 years in the second scenario you had horrible market timing you never got the timing right so you always ended up buying your stocks at the top of the market right before it crashed and if you had invested like this you would have ended up with five hundred seventy seven thousand five hundred thirty two dollars at the end of those 31 years and finally in the third scenario you had a very different approach from the first two so instead of trying to time the market and picking the best times to buy you just invested on a recurring basis $500 a month every single month in other words you invested like a robot every month you bought the same dollar amount of stocks whether the market was high or low crashing or not crashing this strategy is also known as dollar cost averaging and if you had invested like this you would have ended up with three million one hundred eighty three thousand two hundred twenty four dollars and forty six cents at the end of the 31 years keep in mind all three of these investors contributed five hundred dollars a month or a total of 192 thousand dollars over the course of those 31 years and they all invested in the same S&P 500 index fund same investment same amount of money that they each put in three very different outcomes if you want to see for yourself how I came up with these results you can get my spreadsheet right below the video in this in the description so check it out if you want to verify my numbers okay so what can we learn from this the number one takeaway from this study is that you should definitely smash that like button all jokes aside I think there's three key takeaways the first takeaway is that in all three scenarios you ended up with way more money than you started with in all three situations you contributed 500 a month or a total of 192 thousand and you still ended up with more than you actually put in what this tells me is that even if you have horrible market timing it's still better to invest than to not invest because if you don't invest then you just save your cash in a bank account then at the end of those 31 years you'll just have what you put in which is the hundred ninety two thousand dollars over the long-run the investor always ends up better than the saver the second takeaway is that if you just forget about trying to time the market and you just make regular purchases instead with a dollar cost averaging strategy you would have ended up with one point one eight million dollars you'd be a millionaire not too shabby right and what's amazing is that the difference between having done a regular dollar cost averaging strategy versus having bought at exactly the best times with perfect market timing is not huge the person who timed the market perfectly in other words in that first scenario they ended up with one point two three five million dollars so that's only a difference of fifty two thousand dollars from the dollar cost average er and the thing is it's actually impossible to time the market I'll show you some very sobering stats on that in just a minute but given that making consistent investments at regular monthly intervals is something that anyone can do and that it's actually doable I think that is the best approach the third takeaway is that a long time horizon is key even in the worst case scenario where you always got in to the market at the very top if you had a long time horizon and the period that I looked at was a 31 year time period you still ended up with more money than you put in and in the dollar cost averaging scenario as well as the best-case scenario you ended up with exponentially more money than you put in what most people forget to consider is that when you own stocks you also get dividends that entire time and then those dividends get reinv