Waiting for the Perfect Investment Moment Can Carry a Cost

Waiting for the perfect moment to invest can prove more costly than buying at an imperfect price, according to historical research from the Schwab Center for Financial Research. Its comparison of hypothetical investment strategies found that consistently putting money to work came close to the results of perfectly timed annual purchases.

The study examined investors receiving $2,000 annually over the 20 years ending in 2024, with stock investments represented by the S&P 500. Buying at each year's lowest closing level produced $186,077, compared with $170,555 for investing on the first trading day each year.

Spreading each annual contribution across monthly purchases produced $166,591. The investor who remained in cash investments, represented by Treasury bills, finished with $47,357, illustrating the potential cost of waiting indefinitely rather than committing to an investment plan.

Those figures describe hypothetical outcomes, not returns investors can expect to repeat. Schwab's examples assumed reinvested dividends and interest and excluded taxes, fees and expenses, all of which would reduce the amounts ultimately available to an investor.

For investors uncomfortable committing available money at once, dollar-cost averaging offers another approach. Investor.gov defines it as investing equal amounts at regular intervals regardless of market movements, rather than making each purchase contingent on a forecast about where prices go next.

A fixed contribution buys more shares when prices are lower and fewer when prices are higher. That changes how purchases are distributed across market conditions, but it does not establish in advance which purchase will prove cheapest or whether the investment will ultimately gain value.

The Financial Industry Regulatory Authority says a regular investment schedule can help reduce emotional decisions, including selling during declines or rushing to buy after prices rise. For someone worried about an immediate downturn, gradual purchases also leave some money unexposed to market losses while it awaits investment.

That reassurance comes with a trade-off. FINRA notes that spreading out an already available lump sum can sacrifice gains because some money remains in cash, while repeated transactions may add costs when commissions or other transaction fees apply.

There is also a distinction between delaying the investment of existing savings and investing new earnings as they arrive. FINRA says the same opportunity-cost argument does not apply to regular defined-contribution retirement-plan contributions, because that money is being invested as it becomes available rather than deliberately held back.

The decision ahead is therefore broader than whether the next market move will be up or down. FINRA's guidance emphasizes weighing potential returns against tolerance for risk and volatility: a repeatable investment schedule may help maintain discipline, but the appropriate approach still depends on individual financial goals.