Stocks need time — not timing — to deliver results

Everyone has an opinion about the direction of the market. This past weekend I read that because the Dow Transports are up significantly in 2014 (17 percent year to date), that strong performance is bullish for the market averages going forward.

Then I read that the stock market averages will, in fact, be unable to rally significantly from current levels because small- and mid-cap stocks aren't performing well.

And last week, financial news commentators fell into a speculative frenzy over whether, and when, the Fed will begin to raise interest rates. Here is what I learned: It either will be disastrous or fabulous for stocks.

In 1987, when I was a young investment professional, my colleagues and I watched in horror, on what we now call Black Monday, as the Dow Jones Industrial Average dropped 508 points, or 22.6 percent in one day. Had we panicked and sold our holdings, we would have missed two of the largest one-day gains in the Dow since 1950. In fact, despite the colossal decline on Black Monday, the DJIA produced a positive return of 6 percent in 1987 and went on to generate an average annual return of 11.1 percent for the subsequent 26 years.

Important to note: That period also includes the horrible sell-off most of us experienced (and remember!) in 2008. My point? Timing the market is tough. Even after, and including 2008, stocks have been stellar performers.

A 2013 Morningstar study measured the success of individual investors trying to time the market. The study concluded that investors who moved money in and out of mutual funds performed worse than the actual performance of the fund.

Over every time period measured — one, three, five, 10 and 15 years — returns were better when investors stayed put in their selected mutual fund rather than try to time the market by moving assets in and out of the fund. In a 2013 article titled "The Seven Deadly Sins of Investing," the Wall Street Journal concluded: "Investors still make the kinds of mistakes that have gotten them in trouble for decades." The featured sin? Poor timing.

So here we are in year six of strong market returns. Is now the time to invest, or should we hold off? It is true, investing produces a perpetual state of unease: When the market decreases, we own too much in stocks; when stocks rise, we don't own enough.

But I comfort myself with a balance of the facts and my risk orientation. Over the long term, stocks perform better than other investments. And although the research shows that being fully invested produces better returns than dollar-cost averaging, taking my time makes a "toe-dipper" like me feel better.

Don't ever extend beyond your comfort zone. If you are investing for future goals, pay less attention to the chatter and stick to your investment plan. Stocks need time (not timing) to deliver results.

Nancy Tengler spent two decades as a professional investor. She is an author, financial-news commentator and university professor; her book, "The Women's Guide to Successful Investing," is out now. Reach her at nancy.tengler@cox.net.