"The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway... It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.” Warren Buffett

In This Edition
Why Investors Should Not Try to Time the Market
Latest Podcast
Testimonial

When you get this newsletter my wife and I should be safely in Paris, as part of a 30 day vacation. This is the first vacation, since I retired in 2012, where I promised Zan that I will not work during the trip.

Actually, what we negotiated is that I will not record podcasts or videos, write newsletters, or take on projects that consume long periods of work. What I will keep doing is answering questions and comments that our readers and viewers ask regarding our Boot Camp Series.

Bootcamp #6 Fixed Distributions 2025 Update

I have just started working on a project that combines my desire to educate investors of all ages and investment objectives, with the amazing support of AI. The following is a taste of the project.

One of our Truth Tellers, Ben Carlson, just wrote an article entitled, "When Buy and Hold Dies.” I think that Ben’s comments are spot on but I thought it would be interesting to see if there is another way to address the topic.

After reading Ben’s article I asked Chatgpt for a 500 word article on why investors should not try to time the market. Here is what it wrote in less than 30 seconds:

Why Investors Should Not Try to Time the Market
One of the biggest mistakes investors make is attempting to time the market—buying stocks when they believe prices are low and selling when they believe prices are high. While this approach seems logical, history and data show that even professional investors struggle to time the market successfully. For long-term investors, trying to predict market movements can lead to costly mistakes, missed opportunities, and unnecessary stress.

1. Market Timing is Nearly Impossible
The stock market is influenced by countless unpredictable factors—economic data, corporate earnings, geopolitical events, and investor sentiment. Even experts with access to vast amounts of data fail to consistently predict short-term market movements. While some investors may get lucky a few times, no one can consistently time the market with accuracy over the long run.

Consider the financial crisis of 2008 or the COVID-19 market crash in 2020. Many investors who panicked and sold their stocks missed the subsequent recovery, which happened faster than most expected. The best days in the stock market often come immediately after the worst days, making it easy to miss out on rebounds.

2. Missing the Market’s Best Days Hurts Returns
Numerous studies have shown that missing just a handful of the stock market’s best-performing days can significantly impact long-term returns. For example, a study by J.P. Morgan found that from 1999 to 2018, an investor who stayed fully invested in the S&P 500 earned an average annual return of 5.6%. However, if that investor missed just the 10 best days during that period, their return dropped to 2.0%. If they missed the 20 best days, their return was negative.

The problem is that the best days often occur during periods of extreme volatility, when investors are most tempted to exit the market. Trying to time entries and exits increases the risk of missing these crucial recovery days.

3. Emotional Investing Leads to Bad Decisions
Market timing often leads to emotional investing, where decisions are driven by fear and greed rather than logic and discipline. When the market is falling, fear causes investors to sell at low prices. When the market is rising, greed tempts investors to buy at high prices. This cycle of buying high and selling low can erode wealth over time.

Long-term investors who stay the course through market ups and downs tend to do far better than those who react emotionally to short-term market swings.

4. A Better Strategy: Stay Invested and Diversify
Instead of trying to time the market, investors should focus on long-term strategies like:

Dollar-cost averaging – Investing a fixed amount regularly reduces the risk of investing at the wrong time.

Diversification – Spreading investments across asset classes helps reduce risk.

Staying invested – Historically, the market has trended upward over long periods. Those who remain patient benefit from compounding growth.

Conclusion
Trying to time the market is a losing strategy for most investors. Instead of chasing short-term gains, focus on a disciplined, long-term investment approach. The key to success is staying invested, maintaining diversification, and ignoring short-term noise. Over time, this strategy has proven far more effective than attempting to predict the market’s next move.

My Thoughts

My thoughts were it was a very good answer but it seemed to address the topic from the point of view of someone in the accumulation period of their life.

So, I added a request: "please rewrite and include the ideas that having enough exposure to bonds should limit the amount loss to no more than your personal risk tolerance. Make it 600 words instead of 500.” I added the extra 100 words as I expected a similar article but with the addition of adding some fixed income to the portfolio.

Here is what I got:

Why Investors Should Not Try to Time the Market
One of the most common mistakes investors make is trying to time the market—buying stocks when they believe prices are low and selling when they believe prices are high. While this approach seems logical in theory, history and data show that even professional investors struggle to time the market consistently. For long-term investors, attempting to predict market movements often leads to costly mistakes, missed opportunities, and unnecessary stress.

Instead of trying to outguess the market, a better approach is to build a diversified portfolio with the right mix of stocks and bonds based on your risk tolerance. Bonds play a critical role in protecting investors from market downturns, ensuring that they don’t feel pressured to sell stocks at the worst possible time.

1. Market Timing is Nearly Impossible
The stock market is influenced by countless unpredictable factors, including economic data, corporate earnings, Federal Reserve policies, geopolitical events, and investor sentiment. Even professional analysts with access to vast amounts of information rarely predict short-term market movements with accuracy.

Take the 2008 financial crisis or the COVID-19 crash of 2020 as examples. Many investors who panicked and sold their stocks missed the rapid recoveries that followed. The market often rebounds when people least expect it, making it difficult to successfully time entries and exits.

Instead of trying to time the market, a proper asset allocation strategy ensures that you’re always positioned for both growth and protection. Having enough exposure to bonds reduces the impact of market downturns, limiting losses to a level that aligns with your personal risk tolerance.

2. Missing the Market’s Best Days Hurts Returns
One of the biggest dangers of market timing is missing the market’s best-performing days. Many of these occur right after market downturns, making them easy to miss if you’ve sold your investments in fear.

A study by J.P. Morgan analyzed the S&P 500 from 1999 to 2018 and found that an investor who stayed fully invested earned an average annual return of 5.6%. However, if they missed just the 10 best days, their return dropped to 2.0%. Missing the 20 best days resulted in negative returns.

This means that being out of the market—even for a short time—can dramatically hurt long-term gains. The best way to protect yourself? Maintain a well-diversified portfolio with an appropriate mix of stocks and bonds, so that you aren’t tempted to sell during market turbulence.

3. Bonds Help Reduce Volatility and Protect Against Emotional Decisions
Market timing often leads to emotional investing, where decisions are driven by fear and greed rather than rational analysis. When stocks fall sharply, fear drives investors to sell at a loss. When markets rise, greed tempts them to buy at inflated prices. This cycle of buying high and selling low can destroy long-term wealth.

This is where bonds play a crucial role. While stocks can be volatile, bonds tend to provide stability and predictable returns. If your portfolio contains a sufficient allocation to bonds, market downturns will have a smaller impact on your overall wealth. This reduces panic and prevents emotional decision-making.

For example, if a portfolio consists of 80% stocks and 20% bonds, the bond portion will help cushion the impact of a market decline. A more conservative investor might hold 60% stocks and 40% bonds, further reducing risk. By holding the right mix of stocks and bonds based on your personal risk tolerance, you’re less likely to react impulsively and make costly mistakes.

4. A Better Strategy: Stay Invested and Diversified
Instead of trying to time the market, a smarter approach is to:

Determine your risk tolerance – Understand how much market volatility you can handle without panic-selling.
Maintain a balanced mix of stocks and bonds – Bonds help reduce risk and provide income, ensuring a smoother ride.
Use dollar-cost averaging – Invest consistently over time, buying more shares when prices are low and fewer when they are high.
Stay the course – Focus on long-term gains instead of short-term market movements.

Conclusion
Trying to time the market is a losing strategy for most investors. The market’s best days often follow its worst days, and even the most experienced investors fail to consistently predict market swings. Instead of attempting to guess market movements, build a diversified portfolio with a mix of stocks and bonds that aligns with your risk tolerance.

By maintaining a long-term perspective and ensuring enough bond exposure to limit potential losses, you can avoid emotional mistakes, reduce volatility, and stay on track toward financial success. The key to smart investing isn’t trying to predict the market—it’s creating a plan that allows you to stay invested through all market conditions.

My Response:

I realized that the two reports could be used to help two different groups of investors: One for accumulators and another for those taking distributions. So I asked it to: "rewrite the article reminding young investors that they should take advantage of declining markets as their dollar cost averaging will buy them more shares for the long term growth of their retirement savings."

ChatGPT said:
Why Young Investors Should Not Try to Time the Market
Many investors, especially those new to investing, are tempted to time the market—trying to buy stocks when they believe prices are low and sell when they believe prices are high. While this strategy sounds appealing, even professional investors struggle to consistently predict short-term market movements.

For young investors, market timing is not only unnecessary but also counterproductive. Instead of fearing market downturns, young investors should embrace declining markets as an opportunity to buy more shares at lower prices. By using dollar-cost averaging and maintaining a long-term perspective, they can maximize their retirement savings and take advantage of market volatility rather than being harmed by it.

1. Market Timing is Nearly Impossible
The stock market is influenced by countless unpredictable factors, including economic data, Federal Reserve policies, global events, and corporate earnings. Even experts with access to advanced analytics fail to time the market consistently.

For example, during the 2008 financial crisis and the COVID-19 crash of 2020, many investors panicked and sold their stocks at low prices. However, those who stayed invested or bought more shares during the downturn saw significant gains when the market recovered.

For young investors with decades ahead before retirement, market downturns are actually a gift—they provide a chance to buy stocks on sale and accumulate more shares at lower prices.

2. Why Declining Markets Benefit Young Investors
One of the biggest advantages young investors have is time. When the market declines, stocks become cheaper, allowing investors to purchase more shares for the same amount of money. Over time, as the market recovers, those additional shares grow in value, leading to higher long-term returns.

A powerful strategy for taking advantage of declining markets is dollar-cost averaging—investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy ensures that:

When stock prices are high, you buy fewer shares.
When stock prices are low, you buy more shares.

Over time, you reduce the risk of investing all your money at the wrong time.

For example, if you invest $500 per month into a retirement account, and the market drops by 20%, that same $500 will now buy more shares than before. When the market eventually rebounds, those extra shares will significantly boost your overall returns.

Young investors should welcome bear markets instead of fearing them—market declines are buying opportunities, not a reason to stop investing.

3. Avoid Emotional Investing and Stay Focused on the Long Term
One of the biggest risks of market timing is making emotional decisions. When markets fall, fear leads many investors to sell at the worst possible time. When markets rise, greed tempts them to buy at inflated prices. This cycle of buying high and selling low destroys wealth over time.

By maintaining a long-term mindset and sticking to a disciplined investment plan, young investors can avoid emotional mistakes and stay focused on building wealth over decades.

Additionally, having some bonds in a portfolio can help reduce volatility and minimize losses, preventing panic during downturns. However, young investors should maintain a higher percentage of stocks to maximize long-term growth.

4. The Best Strategy: Stay Invested and Keep Buying
Instead of trying to time the market, young investors should:
✅ Embrace market downturns – Treat them as opportunities to buy more shares at lower prices.
✅ Use dollar-cost averaging – Invest consistently, no matter what the market is doing.
✅ Stay diversified – Own a mix of stocks and bonds to balance risk and reward.
✅ Think long-term – The stock market has always trended upward over long periods.

Conclusion
Young investors have a unique advantage: time. Market downturns should not be feared but rather seen as buying opportunities. By continuing to invest during declines, young investors can accumulate more shares at bargain prices, setting themselves up for higher long-term growth.

Instead of trying to time the market, the key to success is to stay invested, embrace volatility, and take full advantage of dollar-cost averaging. The stock market rewards patience, and young investors who stick to their plan will be in the best position to build significant wealth for retirement.

My Closing Thoughts:

I stopped asking Chatgpt.com to rewrite the article, although I do have at least one more thing I would like to address. I am getting more efficient in my use of communicating with the source.

I am very interested in your comments about using this approach to educating yourself about how to become a better investor. Please drop me an email on the subject. It will give me something to think about as I enjoy our vacation.

Latest Podcast- Bootcamp #6 Fixed Distributions 2025 Update

The move from the accumulation to distribution period of an investors lifetime includes some very important decisions.

What asset allocation between equities and fixed income
What combination of equity asset classes in the equity portion, as well as fixed income asset classes?
What amount of distribution will be made annually?
Will the payments be monthly, quarterly or annually?
Will payments be adjusted for inflation and how often?
Will the distributions be based on a fixed distribution with regular adjustments for inflation (the topic in this presentation) or on a flexible basis (the topic of the next segment)?

In this podcast Paul uses 15 slides to address the questions above. It is recommended the viewer print out the ⁠⁠⁠⁠PP presentation⁠ to make it easier to follow the numbers.

Many may find it is easier to follow the information on⁠ Paul’s video⁠⁠ on the same topic.

If you have questions about the presentation please leave comment or question in the comment section of the video or email ⁠⁠paul@paulmerriman.com⁠⁠. For those sending an email please let us know the topic of the Boot Camp presentation.

Testimonial

"I just discovered you and your program from a mention in a FB investing group and just watched the first video in your bootcamp. WOW - you are an amazing teacher. I learned so much. I've been haphazardly investing since 1994. After all these years and for the first time I understand diversification. You are a gem." S.G.

Bootcamp #6 Fixed Distributions 2025 Update

Why young investors should own stocks — not bonds

In This Edition Why Investors Should Not Try to Time the MarketLatest PodcastTestimonial

In This Edition
Why Investors Should Not Try to Time the Market
Latest Podcast
Testimonial