Staying In Stock Funds Makes Sense, Despite Bad Year.(B)(MUTBOT)

Continued from B1

S&P 500 index fund. The fourth stashed cash in Treasury bills.

Investor No. 1 timed the market perfectly, buying shares at the lowest monthly price each year. Investor No. 2 invested on Dec. 31 of each year, ignoring market moves. A third investor was a bad market timer, putting his money to work at the market peak each year. The fourth investor left his money in T-bills because he was afraid the market would keep going lower.

At the end of the 20 years, the market timer with perfect foresight and Investor No. 2 had the largest account balances. Their nest eggs had grown to $387,120 and $362,185, respectively.

Investor No. 3, the bad market timer, had a balance of $321,569. The hesitant fourth investor, who never bought stocks, ended up with only $76,558.

"The study provides several lessons," said Bryan Olson, vice president of the Schwab Center for Investment Research. "First, investing is better than standing on the sidelines. The investors who got into the market, regardless oftheir different strategies, did much better than the person who stayed in cash."

The second lesson is that investing your money as soon as possible works almostas well as perfect market timing.