What Is Your Timing?

You invest because you want to retire in four decades or send your kids to college in two decades, or buy a home or a boat in one. Or maybe it’s something else entirely. Whatever the goal, it probably comes with a rough time horizon: You want to do this thing starting around that time.

The small overall decline in the stock market over the past few days pales in comparison with the large gains over the past few years. So hopefully you’re still on schedule to meet your goals, absent any big health or job changes.

This moment of checking your gut, however, is as good a time as any to consider whether you have the right proportion of your money in stocks versus other options like cash, bonds or real estate that don’t experience this kind of volatility or may not rise or fall in tandem with stocks. In other words, are you taking too much risk? Or too little? If so, buy or sell some stocks accordingly — not because of what the stock market will or will not do next but because you are or are not on track to pay for the things you want to buy someday.

Can You Predict What the Market Will Do Next?

Let me answer that one for you: No. Perhaps you got lucky with some individual stocks as a teenager or used what you learned in finance class to buy just the right mutual fund at exactly the right time.

Congratulations! But you’re almost certainly more lucky than you are smart. Professionals rarely do so well over 50 years that their decisions about when to get in and out of a stock lead to better performance than they might have achieved by just putting money into an index fund that buys every stock in a particular category. And you can’t know ahead of time whether you are that rare breed of market genius.

Still tempted to sell and wait out this latest market hiccup? Plenty of studies warn against this, including one that shows that missing out on just 10 of the best days in the stock market over 160,000 daily returns in 15 markets around the world can cause you to end up with about half of what you would have earned if you had stuck with an index fund over time.