Should I Wait for a Market Correction Before Investing?

The temptation to wait for a market correction before investing is one of the most common and costly mistakes individual investors make. It feels prudent and rational, but the data overwhelmingly shows that waiting for a correction typically results in worse outcomes than investing immediately.

Warren Buffett has addressed this question directly: "Trying to time the market is a fool's game. The best time to invest was yesterday. The second-best time is today." This is not just a catchy phrase -- it reflects the mathematical reality that markets spend far more time going up than going down. Since 1926, the S&P 500 has been positive in approximately 73% of all calendar years. Waiting for a correction means spending most of your time out of a rising market.

The research on this topic is remarkably consistent. Studies comparing "lump sum investing" versus "waiting for a dip" show that investing immediately outperforms waiting approximately 66% of the time. This is because the cost of waiting -- missing the returns while the market continues to rise -- typically exceeds the benefit of buying at a slightly lower price during the eventual correction.

Charlie Munger illustrates the folly of waiting with a simple observation: investors who waited for a correction in 2010, when the market "felt expensive" after recovering from the 2009 bottom, missed a decade of extraordinary returns. The market was "expensive" at 1,100 on the S&P 500 in 2010. By 2020, it was above 3,000 -- and it was still "expensive." Those who waited for the "right time" never found it because every new level felt expensive compared to where prices were when they first decided to wait.

Howard Marks identifies the psychological trap: once you decide to wait, you create an emotional anchor that makes it nearly impossible to invest. If the market drops 10%, you think, "Maybe it will drop more." If the market rises 10%, you think, "I missed my chance, I will wait for the next dip." This psychological paralysis can keep investors on the sidelines for years or even decades.

The only scenario where waiting clearly wins is if a severe bear market (30%+ decline) begins shortly after you were about to invest. But predicting when these occur is essentially impossible. Since 1926, there have been only about a dozen bear markets of this severity. The odds of one starting in any given month are roughly 1-2%. Waiting for an event with such low probability while missing the much higher probability of continued market gains is a losing bet in expected value terms.

Your Action Plan

The Bottom Line

The hardest truth about market timing is that the "perfect time" to invest almost always looks terrifying in the moment. The best buying opportunities feel like the worst times to invest.