Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

Staying the Course versus Timing the Market – Morningstar

Key Takeaways

  • As the old saying goes, time in the market is generally superior to timing the market. Yet, investors tend to have a bad habit of buying winners too late and dumping losers too soon.
  • Staying the course does not necessarily mean sitting still. It means avoiding bad behaviour, remembering your goal, and ensuring you approach markets with discipline.

According to Stewart Alsop’s 1973 memoirs of a conversation with Winston Churchill, the British prime minister contemplated towards the end of World War II: “America, it is a great and strong country, like a workhorse pulling the rest of the world out of despond and despair. But will it stay the course?”

We ask the same question today of investors, after what has been an emotive period for financial markets. From trade wars to Brexit, North Korean tensions to Italian political turmoil, we’ve had plenty of noise to deal with. So, what do we mean by “staying the course”? It is not always about sitting still (even though this is often the easiest path to investing success), but rather, to focus on the goal that you set in the first place and ensure your behaviour aligns with it.

Let’s face it, investors too often redirect their focus from the destination to the journey. Much like in other walks of life, we can lose focus, making us susceptible to capitulation or giving up at the exact moments when we require fortitude and resolve. That is, investors are hard-wired to be procyclical, chasing the winners and selling out of the losers because of a yearning to make money work harder for us. This is not just conceptual, we can see it directly in the fund flow numbers.

Morningstar - Asset-Weighted Returns vs Actual Fund Returns

Therefore, it is vital that as investors we remain vigilantly aware of how animal spirits can drive irrational decision-making, and that we adopt a reasoned framework for investing. Behavioural errors can wreak havoc on long-term portfolio returns due to excessive and unjustified turnover.

A Step-by-Step Guide to Staying the Course

The best thing an investor can do when contemplating change is to reflect on their goals. Would the investment change align with the original investment plan or strategy for reaching well-defined goals? The key question to ask is whether anything has fundamentally changed since setting the original strategy or whether it’s just that the client is disappointed with the progress towards goals.

If something has fundamentally changed, the next question to ask is whether you can clearly identify what has changed. Write it down, then balance this by writing what it might mean if you’re wrong. This should include any misjudgment risk as well as the added costs if you decided to change investments. You will often find that the change you desire is not necessarily going to increase the probability of reaching your goal/s.

If it has “just” disappointed you, but nothing has fundamentally changed, the likely best option is to stay the course. By thinking probabilistically and remembering that investment markets never move in straight lines, you may avoid the perils of trying to time the market. Furthermore, you may benefit by doing the opposite to your intuition (given the evidence against it) and teach yourself to be a contrarian.

What We Think about Staying the Course

As professional, multi-asset investors, we focus on the investment objective, always bearing in mind the opportunity costs and risks. We also write down a balanced thesis that ensures we remove any emotion from our decision-making.

In this sense, staying the course is not idle or passive, but rather about staying aware. Some investors may look at a recent period of lean returns and, with a hindsight bias and the herd mentality at play, will fear for the future. Many will further justify to themselves that reward for risk is simply not sufficient and will consider a change in strategy. This thinking is usually well intentioned, but it is dangerous and must be thought through with a long-term perspective.

Staying the Course vs. Timing the Market

Investing, like many things, often involves taking the thorns with the roses. Over dozens of years and through all investment literature there is one golden thread–the evidence clearly favours time in the market over timing the market. This can be illustrated in various ways, but one of the most compelling is to simply reflect on the cost of missing the best days in the market.

Morningstar Disclaimers:

The opinions, information, data, and analyses presented herein do not constitute investment advice; are provided as of the date written; and are subject to change without notice. Every effort has been made to ensure the accuracy of the information provided, but Morningstar makes no warranty, express or implied regarding such information. The information presented herein will be deemed to be superseded by any subsequent versions of this document. Except as otherwise required by law, Morningstar, Inc or its subsidiaries shall not be responsible for any trading decisions, damages or losses resulting from, or related to, the information, data, analyses or opinions or their use. Past performance is not a guide to future returns. The value of investments may go down as well as up and an investor may not get back the amount invested. Reference to any specific security is not a recommendation to buy or sell that security. It is important to note that investments in securities involve risk, including as a result of market and general economic conditions, and will not always be profitable. Indexes are unmanaged and not available for direct investment.

This commentary may contain certain forward-looking statements. We use words such as “expects”, “anticipates”, “believes”, “estimates”, “forecasts”, and similar expressions to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially and/or substantially from any future results, performance or achievements expressed or implied by those projected in the forward-looking statements for any reason.

The Report and its contents are not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Morningstar or its subsidiaries or affiliates to any registration or licensing requirements in such jurisdiction.

MeDirect Disclaimers:

This information has been accurately reproduced, as received from Morningstar, Inc. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or
solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your
investment return therefrom. Any decision to invest should always be based upon the details
contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta)

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

MeDirect supports Angela House
All News

MeDirect supports children at Angela House

MeDirect is supporting the Ursuline Sisters at Angela House to give the children in their care a better Christmas through the donation of vouchers which can be used to buy clothes, toys and food.

Three investment themes at COP28
All News

BlackRock Commentary: Three investment themes at the UN climate conference (COP28)

The move towards low-carbon initiatives is one of the five significant forces or structural shifts that BlackRock observes for investment opportunities and risks. During the UN climate conference (COP28) in Dubai, their focus is directed towards three investment themes: climate resilience, facilitating climate finance in emerging markets, and new policy initiatives that may influence the trajectory of the transition.

Experience better banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. Sign up and open your account for free, within minutes.


We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.