By Hunter Larson

Financial adviser

Timing the stock market seems to be a key driver in the minds of investors in 2017.

“Timing the stock market” can be referred to as investors trying to get into the market when it is low and trying to get out of the market when it is high. As famous investors have put it, “buy low and sell high.” However, timing the market can be risky business and could end up negatively affecting your returns in the long run. It is important to be a prudent investor and participate in the market at all times, even when the market is correcting.

The most recent presidential election is a prime example of how it may be beneficial to remain invested in the market. Throughout the election, many people were on edge and confused as to the direction of the country and the stock market. Talking with clients and colleagues, I learned there were quite a few who had cash sitting on the sidelines, waiting to see what the market did. When Donald Trump was elected, I don’t think many investors on Wall Street saw a huge market rally coming. Yet, the S&P 500 gained 4.98 percent from Trump’s election date through the end of 2016.

If an investor had a large amount of money sitting on the sidelines, they would have missed those positive returns. Many of the same investors and colleagues I had talked with thought that the new stock rally meant that the stock market was even more overvalued than it was before the election. However, 2017 year-to-date numbers have continued to climb with the S&P 500 posting gains of 8.81 percent through May 26, meaning that inactive investors potentially missed returns that could have reached 13.79 percent since the election.

Market valuations are important when deciding to invest, but it is equally important to be in the market as opposed to trying to time the market. For example, if you prefer a portfolio allocation of 80 percent stocks and 20 percent bonds during a market run, you may decide to bring your stock exposure to 50 percent and keep the rest in either bonds or cash. The difficult part then is to decide when to bring your exposure to the market up to its normal allocation.

Let’s assume the market declines 20 percent and you got out of it perfectly at the top. The next question you have to ask yourself is, “when do I get back in?” You have to not only guess when the market will decline, but also when it will rebound. Historically, I would like to imagine that over an extended period of time, the market will likely rise. Therefore, I would not want to be out of the market for too long, in fear that even if I guessed the right time to get out, I also would have to guess the right time to get back into the market. The risk is that I would have to buy back in at a lower point than which I sold my investments.

All in all, timing the market is extremely difficult to do, and even professional hedge fund managers can be wrong. The key to success with investing in the stock market is to focus on what you can control. Your behavior before, during and after a recession can be the difference between retiring comfortably and struggling to make ends meet.

It is important to be patient with the market, continue to put a sufficient amount of money away and remain patient during market corrections. This deliberate behavior will give you the best chance of accomplishing your goals.