<b>By Fred Gaskin</b>

Not surprisingly, I regularly receive calls from investors that have been battered by recent events. They’ve witnessed their life savings suffer meaningful declines, and their confidence in the market is shaken. A few have liquidated part, or all, of their investment portfolios. These emotions and reactions are not surprising, and inevitably the conversation shifts to them asking, ‘What should we do with our cash?’ While risk tolerances, investment objectives and time horizons vary, I believe history provides some interesting lessons for investors.

While holding cash feels good over the short term, particularly in these volatile times, it’s not a successful long-term strategy. Consider the fact that if you wait to put your savings to work in stocks and other investments until the “perfect” moment — or even until a time you think will be better than today — history suggests your plan is likely to backfire, resulting in less wealth over time.

To see how waiting to invest can cost you, evaluate the fortunes of four hypothetical investors, based on data from the Schwab Center for Financial Research.

Each received $2,000 at the beginning of every year for 20 years through 2018 — but as you’ll see, each made drastically different decisions about how to invest those sums.

<b>The Perfect Timer.</b> This highly skilled — or very lucky — investor was able to place his $2,000 into the S&amp;P 500 every year at the lowest monthly closing price, thus ensuring the highest possible returns over time.

<b>The Immediate Investor. </b>Each year, this investor kept it simple and invested her $2,000 in the market on the first day of each year.

<b>The Terrible Timer.</b> This investor, prone to terribly bad luck, consistently “bought high” by investing her $2,000 each year at the market's peak.

<b>The Hesitator. </b>This investor ended up never investing at all. Instead, he left his money in cash investments (using Treasury bills as a proxy) every year. He always felt that lower stock prices — and, therefore, better opportunities to invest his money — were just around the corner.

The result? Investing immediately pays off. While the Perfect Timer did best over the course of time, accumulating $175,859 over the 20-year period, the Immediate Investor who put her money to work early and steadily did almost as well. In the same time, the Immediate Investor accumulated $163,126 or just $12,733 less than the Perfect Timer. Even the Terrible Timer came out in good shape, ending up with $141,954.

The worst performer by far: The Hesitator, who by failing to ever invest his money wound up with just $64,651—a substantially smaller amount than all of the others.

The experiences of these four investors offer some important lessons about investing:

The best time to start investing is right now. Don’t get caught up in what the financial markets are doing today or what pundits predict will happen next week. The Immediate Investor’s results demonstrate how smart it can be to invest as soon as you possibly can, while the Hesitator’s poor results show the dangers of dilly dallying.

Even the worst market timing beats doing nothing at all. Over the long term it's almost always better to invest in stocks — even at the worst time each year — than to hesitate and not invest at all. Even with her exceptionally poor timing, the Terrible Timer earned more than 50 percent more than what she would have if she’d avoided the market entirely.

Don’t worry about trying to time the market. Ultimately, the benefits of timing the market perfectly aren’t all that great. Over the 20 years, The Perfect Timer amassed only around $13,000 more than the Immediate Investor who put her cash to work right away. Trying to time the market perfectly is a Herculean task that even most professional investors can’t do successfully over time. Ask yourself: Would you rather stare at stock charts all day or spend your free time with family and friends?

Dollar cost averaging is a great compromise. If you don't have the opportunity, or stomach, to invest a lump sum all at once, consider investing smaller amounts more frequently. Dollar cost averaging helps prevent procrastination by helping you stick to an investment schedule. And by ensuring you put relatively small sums of money to work on a regular and consistent basis, dollar cost averaging helps you buy more of your investments when prices are low, and less when prices are high.

The lessons outlined above are very important, but most investors still need guidance. By committing to a plan, investors can remove much of the emotion from the investment process with a clearly defined objective (Getting Invested!), and importantly, get better invested for the long term. As we’ve mentioned in earlier articles, timing the market’s ups and downs is nearly impossible – instead, focus on staying diversified, know your risk tolerance, and stick to your plan during tough times. For long-term investors, which are most of us, the strategy should be time in the market rather than timing the market.

<i>Fred Gaskin is the branch leader at the Charles Schwab Independent Branch in Bluffton. He has over 35 years of experience helping clients achieve their financial goals. Some content provided here has been compiled from previously published articles authored by various parties at Schwab.</i>

<i>Information presented is for general informational purposes only and is not intended as personalized investment advice. Where specific advice is necessary or appropriate, Charles Schwab recommends consultation with a qualified professional.</i>

<i>The Schwab Center for Financial Research is a division of Charles Schwab &amp; Co., Inc.</i>

<i>Diversification strategies and periodic investment plans (dollar-cost-averaging) do not assure a profit and do not protect against loss in declining markets.</i>

<i>Past performance is no indication of future results.</i>

<i>This analysis shows the outcomes for four hypothetical investors who invested $2,000 a year for 20 years. The Perfect Timer invested each year at the market trough. The Immediate Investor invested immediately on the first day of each year. The Terrible Timer invested each year at the market peak. The Hesitator never implemented the plan and stayed in T-bills. The Perfect Timer &amp; the Terrible Timer invested their yearly $2,000 investments in T-bills while waiting to invest in stocks. Stocks are represented by the S&amp;P500® Index with all dividends invested. Indices are unmanaged, do not incur fees or expenses, and cannot be invested in directly. Average results remained relatively unchanged when the study is extended to 12-month periods that begin with a month other than January. In the case of the 12-month period that goes from February to January, the Immediate Investor invested immediately on the first day of February each 12-month period for 20 years. Ibbotson US 30-Day Treasury Bills is an unweighted index which measures the performance of one-month maturity US Treasury Bills. S&amp;P500® Index is a market-capitalization weighted index that consists of 500 widely traded stocks chosen for market size, liquidity, and industry group representation.</i>