It’s advice you hear time and again from investing pros: Don’t try to time the stock market.
No one knows when the market’s going to drop, by how much, and how long a recovery will take. Instead, investors should buy in at regular intervals — an investing tactic known as dollar-cost averaging — to buy when the market is both up and down. As markets tend to rise over the long term, it’s a winning recipe.
But one money manager for high-net-worth clients thinks investors can have it both ways, and he’s got a strategy he deploys to prove it.
Jeffrey Fratarcangeli, the founder of Fratarcangeli Wealth Management, says he uses a two-pronged approach to investing for some of his clients, who have an average net worth of about $10 million.
Instead of putting all of his clients’ monthly contributions to work in stocks right away, he allocates about 60% to 70% to equities and keeps 30% to 40% on the sidelines, earning interest in a money market account.
This allows Fratarcangeli to both remove the emotional, human element from investing — as dollar-cost averaging does — while still leaving room to potentially buy at more attractive levels for clients when the market goes south.
“What I have found is human hands can screw things up, so do it automatic,” Fratarcangeli said of the dollar-cost-averaging allocation, “and then have that human hand ready to take advantage of scenarios that we’ll see every year.”
“We always want dry powder,” he added.
Fratarcangeli said he usually waits for a 3% to 5% pullback in the market to start adding to positions, and gradually gets more aggressive as a sell-off gets more pronounced and reaches declines of 10% or 20%.
Last April’s “Liberation Day” tariff plunge, for example, was a big opportunity for him to put money to work for clients.
He said he put plenty of money to work during the sell-off, buying in lump sums on April 4, 7, and 8 before the bottom on April 9.
“The the size of the number of trades we made those three days were more than double what my largest previous trading activity,” he said.
In addition to setting thresholds, Fratarcangeli also uses good old fear and greed as an indicator of when to buy and when to pull back. When clients start calling and urging him to dump a position, it’s usually a buy sign, and vice versa.
“When you start hearing people get more nervous, what I’ve come to learn is that it’s probably time to buy,” he said. “Versus on the other side of the spectrum, if you will, you may have someone that’s typically more cautious that all of a sudden wants to get more aggressive — that’s when I know it’s time to sell.”
Fratarcangeli’s strategy is for clients with a time horizon of at least four to five years, he said, as shorter timelines are too risky for stocks.
Is trying to time the market worth it?
Trying to time the market may not be the best strategy for every investor, many of whom may not be watching the market regularly or have the bandwidth to manage their money so actively.
But timing the market well can indeed pay off.
Last year, Charles Schwab conducted a study comparing five investment strategies over a 20-year period from 2005 through 2024. Each of the five imaginary investors were given $2,000 at the start of every year. The one who invested it exactly at each year’s market low performed the best over the two-decade period, ending up with about $186,000.
Meanwhile, investors who invested it all on the first day of the year or in $166.66 increments on the first day of every month ended up with about $170,000 and $166,000, respectively.
Of course, there’s no guarantee you’ll time the market right every time. In the study, the investor who put their money to work at each year’s peak ended up with about $151,000. Still not bad when all is said and done, but well below those who just bought in at pre-determined intervals.
All things considered, the average investor may be better off just dollar-cost averaging. But for those who enjoy managing their money and waiting for the right bargain to come along, Fratarcangeli’s approach might offer a good combination of a passive and an active strategy.
As for where he sees opportunities right now, Fratarcangeli said he’s leaning away from the highly valued tech sector and toward cheaper areas of the market, such as industrials, materials, healthcare, agriculture, and metals. Still, he preached the benefits of a diverse portfolio.
“You’re looking at some of the sectors that are trading at high teens to mid teens,” Fratarcangeli said of their forward price-to-earnings ratios. “Then of course you have the tech sector that’s trading in the 30, 40, 50 times earnings. So you tend to steer towards the value opportunities that also have an explosive earnings outlook, like healthcare.”
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