Does Market Timing Matter?

Four investors, same amount invested over 30 years—only their timing differs. Here’s what the data says.

You’ve probably heard “time in the market beats timing the market.” But how much does timing actually matter? I ran a simple backtest: four people each invest $1,000 per year for 30 years in the S&P 500. The only difference is when they buy.

The four characters

Each character invests the same total ($30,000 over 30 years) but with a different timing rule.

Cartoon of four investors: Barry, Harvey, Skye, and David. — Barry, Harvey, Skye, and David—four timing strategies, one backtest.

Barry — The one who “knows” the bottom. Barry has a crystal ball (or a time machine). Every year she invests her $1,000 on the single day the S&P 500 hits its lowest close. In reality, nobody can do this; we use Barry as the upper bound of “perfect” timing.

Harvey — The one who’s always late. Harvey means well but has historically terrible timing. Every year, he invests on the day the market hits its highest close. This means Harvey bought at the absolute top of the Dot-com bubble (2000), right before the 2008 Financial Crisis, immediately preceding the 2020 Covid crash, and at the 2022 peak.

Skye — The one who can’t wait. As soon as she has the money (the first trading day of each year), she invests the full $1,000. No waiting for a dip. Interestingly, Skye usually beats David because her money spends more total days in the market—allowing compounding to start as early as possible each year.

David — The nine-to-fiver. David gets paid every other week and invests a fixed slice each payday: $1,000 ÷ 26 ≈ $38.46 per paycheck. He never tries to time anything; he just invests when the money lands. He’s the personification of "slow and steady."

Data and assumptions

Index: S&P 500 (^GSPC) total return proxy.
Period: 1996 through 2025 (30 full years).
Amount: $1,000 per year per person.
No fees, taxes, or inflation are included; the focus is purely on timing.

Portfolio value over time

The line chart shows each character’s portfolio value year by year. Barry (best timing) ends up highest; Harvey (worst timing) ends up lowest—but notice that even Harvey’s line trends up strongly over 30 years. Skye and David sit in the middle and track each other closely: the “eager” investor and the “steady” investor end up in a similar place.

Final portfolio value: invested vs growth

The bar chart below compares where each person lands at the end. Each bar is split into two parts: the gray band at the bottom is the $30,000 they put in; the colored segment on top is the growth from market returns. So the full height of the bar is their total portfolio value.

Stacked bar chart of final portfolio value for Barry, Harvey, Skye, and David; gray segment = $30k invested, colored segment = growth. — Final portfolio value by strategy. Gray = $30k invested (same for all); colored = growth. Barry leads; Harvey lags but still has substantial growth.

      The spread is real but not catastrophic. Even Harvey—who buys at the worst moment every single year—still grows his $30,000 into well over $100,000. Barry does best; Skye and David land in the middle and close to each other. For long-term goals, staying invested matters more than nailing the perfect entry.
    

        The "Early Bird" Edge: You might notice Skye (Lump Sum) finishes slightly ahead of David (DCA). This is because Skye’s $1,000 is working for her from Day 1 of the year, whereas David’s last $38 contribution doesn't enter the market until late December. 
    

    The Harvey Lesson: Even Harvey—who bought at the absolute worst moment of every major crash for 30 years—still grew his $30,000 into well over $100,000. Staying invested matters more than nailing the perfect entry.
    

Conclusion

If you have a long horizon, timing is not make-or-break. Barry is a thought experiment; nobody can consistently buy the annual low. The comparison that actually matters is between people like Skye (invest when you have the money) and David (invest on a schedule). They end up in the same ballpark. So: automate your contributions if you can, invest when you get paid, and don’t stress about picking the “right” day. Time in the market is what shows up in the data.

The best time to start was years ago. The second best time is today. If you’re maxing (or just contributing to) a 401(k), you’re already doing the right thing; see What if you had maxed your 401(k) every year? for how that can play out over decades.

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