Why waiting for a market dip hurts your returns

When it comes to investing, there are two basic approaches. Some people invest their money as soon as it becomes available – usually via a standing order, since their paycheck comes in monthly. Others keep it in their account and wait for the right moment.

We’ll compare these two approaches using Rita and Emil as examples. Both start in January 1990 with 1'000 francs and then save an additional 1'000 francs every month. The only difference: Rita invests the money immediately, while Emil keeps it in his account until the market seems favorable enough to him.

Rita doesn’t want to worry about timing. She disciplined invests her monthly savings in the Swiss stock market. So, at the beginning of each month, she buys shares of an ETF that tracks the Swiss Performance Index (SPI).

Emil doesn’t want to buy at too high a price under any circumstances. When prices rise, he considers the market overvalued and waits for a correction. He doesn’t buy until the SPI is trading 10 percent below its most recent all-time high. This has happened eight times since 1990.

By then, a substantial amount has accumulated in his account, which he then invests all at once – including any interest earned. The calculations are based on Swiss money market interest rates, specifically the three-month LIBOR or, following its abolition, the SARON. Between 2015 and 2022, these rates were negative; however, this did not result in negative interest rates for small savers. Therefore, an interest rate of zero percent applies for this period.

By the end of August 2026, after nearly 37 years, Rita has 2.3 million francs. Emil has just under 1.8 million. Both have contributed exactly the same amount. There is only one reason for the difference of over half a million francs: stock markets rise more often than they fall, and a bull market typically lasts longer than a bear market. Emil’s money sits in his account for years, missing out on precisely these phases.

We’re leaving costs and taxes out of this comparison. They reduce the return on both investments, but don’t change the key finding.

Maybe Emil just isn’t patient enough. Let’s assume he waits for real bear markets and only buys after a 20 percent drop. There have been four such crashes since 1990. But the result isn’t better – it’s worse: He ends up with just over 1.4 million francs, about 860'000 francs less than Rita. Emil did buy at the bottom every time – but he also sat on the sidelines even longer with even more money.

In other words: Rita achieved an annual return of 7.7 percent, while Emil achieved only 5.7 percent.

Aside from the capital gains, Rita’s approach is much more convenient. Except for setting up her standing order once, she doesn’t have to do anything. Emil, on the other hand, has to constantly monitor the market and react accordingly.

This raises the question of how the results would look if, instead of investing in the SPI, the two were to invest in the much broader MSCI ACWI global index over the same period – measured in Swiss francs.

With her regular contributions, Rita accumulates just over two million Swiss francs, yielding an annual return of 7.2 percent. Emil reaches 1.7 million Swiss francs, which corresponds to a return of 6.5 percent.

When it comes to international stocks as well, Emil invests his saved capital only after a 10 percent correction. After the first contribution, this has happened 11 times – more often than in the somewhat more defensive SPI, with its heavy weighting in the food and pharmaceutical sectors.

What if Emil only buys during bear markets globally – that is, only when prices have fallen by at least 20 percent? Since 1990, there have been six such bear markets – again, more than in the Swiss market.

This brings his total to just over 1.8 million francs, or 6.7 percent per year – which, unlike in the Swiss market, is slightly better than the returns from buying after minor corrections. What’s noteworthy here is that the bargain purchases made during the bear market paid off in the short term. What ultimately leaves Emil nearly 216'000 francs behind Rita isn’t the purchase made during the market crash, but rather the money that had been sitting in his account for years prior to that.

The conclusion is clear: Waiting for the next market crash costs you returns. In all four scenarios – Switzerland or the world, down 10 or 20 percent – Emil lags behind Rita. And it’s not because he bought at too high a price. In fact, each of his purchases was made at prices lower than the previous all-time high. He loses because his money isn’t working for him between purchases.

Ultimately, the question isn’t when to invest. It’s how long you’re willing to let money sit in your account that’s actually intended for the stock markets.