🎓 The Most Important Lesson in Investing

Market timing costs you money. Here’s our smarter strategy.

Aug 21, 2025

At The Future Investors, we use our Learning articles to share key lessons that help you become a better long-term investor.

One of the most important lessons: timing the market costs you money. In this article, we share why — and the strategy we use instead. Read further to see our full approach and how we apply it step by step.

Markets Are Unpredictable

Markets move up and down all the time. Some periods are driven by fear, others by optimism. Headlines are full of extremes: “biggest drop in years” or “record rally since decades.”

In moments like this, it’s easy to feel uncertain. As investors, we all ask the same questions:

“Should I buy now?”
“Is this the bottom?”
“Should I wait?”
“Should I sell and get back in later?”

The reality is: nobody knows. Short-term moves are unpredictable and often driven by emotions. What feels like the worst time to invest can suddenly turn into the best opportunity.

History shows an important pattern: the best days often follow right after the worst ones. If you’re not invested when that happens, you miss out — and it can cost you a lot.

Source: FMP Wealth Advisers

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The costs of timing the market

Let’s say you had invested $10,000 in the S&P 500 between January 2003 and December 2022, and you just left it alone. You would have $64,844.

But if you missed just the 10 best days in that whole 20-year period, you would have only $29,708. That’s less than half.

And get this, 7 of those 10 best days happened during bear markets, when things looked really bad.

If you had missed the 40 best days, your return would actually be negative.

This shows how dangerous it can be to jump in and out of the market. Timing it wrong will costs you money.

There’s a reason investors say:

“Time in the market beats timing the market.”

Source: Visual Capitalist

Our strategy instead of timing

Since timing the market is so hard (basically impossible), we follow a different plan — one that doesn’t rely on timing the market.

Here’s what we do:

1. We invest in high-quality companies.
These are businesses with strong leadership, durable competitive advantages (moats), steady profits, and long-term potential — companies that can survive a recession and remain essential even during economic weak times.

To identify these businesses, we use our Fundamental Scoring Framework, which rates companies across 19 different factors, from financial strength and profitability to management quality and competitive positioning. This gives us a clear view of a company’s true quality.

In our Unpacked series, we share this framework with you: each month we analyze a company in detail and give it a fundamental score between 0 and 100:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

Curious about our Fundamental Scoring Framework and the companies we’ve rated? Check them out here.

2. At a fair price
When evaluating these companies, we look at their valuations to make sure we're buying at a reasonable price. We focus on multiple key ratios such as the Price-to-Earnings (P/E), Price-to-Sales (P/S) and Price-to-Free-Cash-Flow (P/FCF) ratios compared to their historical averages. We also consider the Price-to-Earnings Growth (PEG) ratio, which adjusts the P/E ratio for the company's expected earnings growth. A lower PEG suggests that a company is more reasonably priced in relation to its future growth prospects.

In addition to valuation multiples, we closely track margin development and growth in revenue, earnings, free cash flow and ROIC (Return on Invested Capital) to ensure the business is not only fairly priced but also strengthening its fundamentals over time. Because a company that is only “cheap” isn’t interesting — it needs to combine an attractive valuation with solid fundamentals and sustainable growth.

3. We use a value averaging down strategy
Once we believe a company is reasonably valued, we apply what we call a Value Averaging Down strategy. Each time the company's price drops more and hits our price targets, we increase our investment. The lower the price, the more we buy. This approach allows us to take advantage of market dips and position ourselves for greater long-term returns.

This also help us to reduce risk by spreading out investments over time, which can avoid the potential downside of investing a large sum at the wrong price.

4. Sometimes we invest more at once.
When prices are really low and the market is undervalued, it can be smart to invest a larger amount at once. Studies from Vanguard show that in around 68% of the cases, investing all at once (lump sum) gives better returns for the long term than spreading it out.

Markets have historically moved upward over time. By investing all at once, you can benefit from that growth earlier and for longer.

As mentioned before: "time in the market beats timing the market." Still, when valuations are high or right before a market correction, spreading your investment can be a smarter move. During the dot-com crash (2000–2003) and the financial crisis (2008–2009), this approach helped reduce immediate losses

For now, since the market seems quite overvalued (especially in the US), we stick with our Value Averaging Down strategy. But if prices drop more and stocks become cheaper, we will invest more aggressively.

Curious to see how we apply this strategy in practice? Take a look at our portfolios 👇.

View our Portfolios

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Final thoughts

Trying to time the market is like trying to guess the weather months in advance. You might get lucky once, but over time, it usually doesn’t work.

Instead of trying to be perfect, we focus on being consistent and stick to our principles. We invest in strong companies, buy more when valuations become more reasonable, and stay in the market — even when things get scary.

Because the truth is:
🟢 The biggest gains often come right after the biggest drops.
🚫 If you’re not in the market when that happens — it will cost you money!
📈 And the lower the prices go, the higher your potential long-term returns

This is why we believe consistent investing beats trying to time the market. Stay disciplined, focus on quality, and let time do the heavy lifting 💪. We wish you success and confidence on your investment journey!

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