History Says the Wealthiest Long-Term Investors All Avoided This 1 Common Mistake
Key Points
For regular investors, long-term buying and holding tends to produce the best results.
Studies have shown that market timing tends to negatively impact investor returns.
Avoiding the short-term noise and continuing to invest monthly is the best option.
Imagine an investor looking to put money in the S&P 500 (SNPINDEX: ^GSPC) around the end of February when the Iran war started. It would seem sensible that anyone considering investing at that point would just stick their money in cash and wait for tensions to die down.
That investor is probably still waiting. The war is still going on, oil prices are still over $110 a barrel, and there's no sign that the conflict is ending anytime soon.
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But even though the S&P 500 fell by around 9% in the month following the start of the war, it was back to an all-time high by April. Since the end of February, the index is now up over 12%.
The lesson is that no one knows how the market will react to anything. Trying to time the market often does more harm than good, as was the case in this situation. Successful long-term investors know that doing this usually isn't worth it. It's the one mistake they avoid.
Image source: Getty Images.
The case against market timing
There are a number of statistical anecdotes that demonstrate why trying to beat the market by trading doesn't pan out.
J.P. Morgan Asset Management found that the market's biggest up days usually happened very close to the biggest down days. Of the S&P 500's 10 best days over the past 20 years, seven of them happened within 15 days of one of the 10 worst days. In other words, volatile markets whipsaw rapidly in both directions. It's not wise to see one day's big move and assume it's the start of a trend. Because it usually isn't.
Morningstar's 2026 Mind the Gap study showed that the average investor return from U.S. mutual funds and ETFs trailed the actual funds' returns by about 1.2% annually over the past decade. Market timing was cited as the most likely reason this occurs.
For most investors, long-term buy-and-hold investing is usually the best option for building wealth. The more that investors try to do with their portfolios, the more they tend to lag the S&P 500. Doing nothing and simply letting it grow over time often produces the best results.
Buy-and-hold is the best path for most investors
The investors who came out ahead mostly kept things simple. They didn't lose focus on their long-term goals. They didn't try to beat the market. They kept investing regularly on a monthly basis. And they avoided overreacting to short-term events.
If you're able to do that, the odds are good that you'll be happy with the results.
JPMorgan Chase is an advertising partner of Motley Fool Money. David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.