Timing The Market or Time In The Market?

John Cofran
September 7, 2022

In my last article I shared 6 principles for long-term, sustained success in the stock market. The stock market is up over 70% of the time. Following my 6 investing principles should lead to generational wealth creation unlike any other. The 6 principles are:

  1. Educate Yourself: read and learn from the greatest investors of all time
  2. Play the Long Game: avoid get-rich-quick claims and short-term trading/speculation
  3. Be Consistent: add regularly to your stock holdings over your lifetime
  4. Leave Your Emotions At the Door: don’t let fear and greed drive your investment decisions
  5. Know What You Own: invest in simple to understand companies
  6. Buy Low, Sell High: don’t chase hot, overpriced stocks

In this article, I will help you get started with your first stock investments. During the early days of COVID I had dozens of people message me wanting to learn how to invest so they could supplement their income during uncertain times. Over and over, I sat with new investors, showing them exactly what I look at each day, how I choose which stocks to buy, entry prices and exit strategies. We talked about position sizing, basic chart patterns, how to read financial statements and how to open a brokerage account. I believe firmly that anyone can become a stock market multi-millionaire with very little effort or risk.

To begin, I encouraged people to open a brokerage account at a large, reputable and proven brokerage. Today, most brokers offer free accounts, free trading and low minimum balances. Fidelity, Schwab, TD Ameritrade and others like them are excellent places to start. Many online brokers also offer deposit bonuses when you open a new account and make a deposit. I encourage you to deposit the maximum amount you can, understanding this is money you will not access for at least 3 – 5 years. Next, determine to add a fixed amount to your account each month. Increase this amount as you are able. Remember, consistency and a long-term view will help you maximize generational wealth creation. 

While time in the market virtually guarantees long-term wealth creation, timing the market can enhance your results. Throughout history, the stock market has tended to rise and fall in discernible, predictable patterns. The most obvious and frequent patterns quoted by professionals have to do with calendar tendencies of the market. Professionals like to “sell in May and go away.” Likewise, most professionals gear up for the “Santa Claus rally” at the end of each year. In 1950, if you had invested $10,000 on May 1 and held until Oct 31 each year, your initial $10,000 would be worth $12,693 as of December 31, 2020. Conversely, if you had invested $10,000 in 1950 on November 1 and sold on April 30 the following year, and did this each year until 2020, your $10,000 would be worth $1,231,000. That is quite a difference! This is why many professional money managers like to “sell in May and go away.” In simple terms, the market’s greatest gains are typically made in Q4 and Q1 of each year. September is historically the worst month for stocks, and October has been a market bottom or turning point more often than any other month.

So what does this mean for you? If you are new to the market, or are sitting on a pile of cash, September and October represent a great opportunity to begin buying stocks for long-term wealth creation. In my own accounts, I am increasing my allocation to stocks from a low of 20% in January 2022 to 50%-60% by mid-October. Note the principle of Buy Low, Sell High at work here. When the market was making all-time highs, I had reduced my stock exposure to the lowest level of my life. With the markets down 15%-30% in 2022, I am seizing the opportunity to buy back in at greatly discounted prices.

If you are new to the stock market or don’t have the time to do company-specific research, one of the easiest ways to begin investing and gain exposure to stocks is through Exchange Traded Funds. (“ETFs”) An ETF is often referred to as an improved, more efficient version of a mutual fund. With ETFs, trading is liquid, fees are generally low and many brokerages have done lots to make them affordable and accessible to everyday investors. Some of the largest, most popular and least expensive ETFs track popular market indexes, like the S&P 500, the NASDAQ 100 or Russell 2000. In addition, large and liquid ETFs exist to give you exposure to international markets, bonds, growth stocks, value stocks, dividend stocks and just about any industry you might be interested in investing into. ETFs are similar to mutual funds in that they generally hold a portfolio of stocks. Like mutual funds, they can be passively managed and track an entire index or market, or they can be actively managed by a professional manager who picks stocks to buy and sell for the fund. Two of the largest ETF issuers are Vanguard and iShares. With Vanguard and iShares, annual expenses are generally between 0.03% and 0.20% and there are no commissions to buy or sell. Both are great options for getting started with stocks with little effort.

So, if you’re like me and want to build generational wealth in the stock market, consider taking advantage of the seasonal weakness we are experiencing currently. You can open an account in minutes and have it funded in 24 hours or less. Start with an amount you can afford to lose and that you won’t need for at least 3-5 years. Add to your account weekly, monthly or quarterly. Start with a few of the largest offerings from Vanguard and/or iShares. Consider spreading your stock exposure across several ETF categories, such as S&P 500, Russel 2000, NASDAQ 100 and Developed World Markets and Emerging World Markets. Finally, don’t buy all at once. Invest a fraction of your account each week over 4 – 8 weeks so you can take advantage of any negative price fluctuations. By getting started in September or early October, you will have history on your side. Not only will you begin to get time in the market, but you will have strong seasonal trends suggesting good timing as well. 

Get Started Today


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