Market timing is the notoriously difficult part of investing – so difficult that many people have concluded that trying to beat "the market" over any length of time is wasted effort. Fair enough. But that doesn't mean closing your eyes and hoping for the best. There are things you do know, or can closely approximate, when you invest: what the money is for and when you'll need it, what bonds are promising to pay, what things cost today, and that prices tend to rise over time. Use that to build a benchmark, and judge every other investment – and its risk – against it. You probably won't beat the market. But you will know which markets you want to be in, and why.
Every investment involves a timing decision – even the ones designed to avoid it
First, I want to show that timing is unavoidable. Second, I'll outline what can actually help with the decision.
Take a typical, deliberately time-averaged approach. An investor holds a fixed 70% stocks, 20% bonds and 10% gold portfolio and puts in $1,000 every month for 20 years. They then draw their savings down at $4,000 a month, taking the withdrawals from stocks, bonds and gold in the same 70/20/10 proportions they invested in. No market calls, no rebalancing, no attempt at timing anything.
I took the longest history I could find for ETFs in these three asset classes, which starts in July 2002, and ran the plan through it – SPY for US stocks, IEF for US Treasuries, and the gold spot price. Withdrawals start in 2022. By September 2026 the investor would have about $497k left.
Now reverse the order of the returns – the return from September 2026 happens first, the return from July 2002 happens last, with exactly the same set of monthly returns in between. Same plan, same contributions, same withdrawals, same 24 years of market history. The portfolio ends at $338k.
This is a clean example of sequencing risk – the order in which returns arrive matters, not just their average. In the reversed timeline, the 2008 crash lands in 2020–21, right before the withdrawals begin, and the strong early-2000s recovery years are spent on a portfolio that is being drained rather than built.
There is a second, quieter effect. Because nothing is rebalanced, the share of the portfolio held in each asset class also depends on the sequence. The 70/20/10 starting mix drifts – to 87% stocks, 1% bonds and 12% gold in the actual timeline, and to 76%, 4% and 21% in the reversed one. The investor didn't choose either of those portfolios. The market chose them.
| Point in time | Actual order – value | Actual order – stocks / bonds / gold | Reversed order – value | Reversed order – stocks / bonds / gold |
|---|---|---|---|---|
| August 2002 (start) | $1,000 | 70% / 20% / 10% | $1,000 | 70% / 20% / 10% |
| December 2021 (last month of contributions) | $425k | 83% / 9% / 8% | $301k | 74% / 13% / 13% |
| September 2026 (end) | $497k | 87% / 1% / 12% | $338k | 76% / 4% / 21% |
Despite the investor's best efforts to avoid depending on timing, the outcome depends heavily on their timing. That is not a flaw in the plan. It is a property of every plan.
So what is the alternative?
Start with what you know about your own plan and the environment you are investing in. You know, at least approximately, when you intend to access the money and how much of it. You know what bonds are promising to pay, because it is written on them. You know current prices – of your living standard, of stocks, bonds, gold and housing. And you know that, overall, prices tend to go up over time.
How does that help? Take a retirement saver as the example:
- They need a retirement income from 20 years onwards (unless dead). Let's take 10 years as the halfway mark, to keep the arithmetic simple.
- 10-year UK Government bonds promise to pay 5.3% a year in cash terms.
- 10-year UK index-linked gilts promise to pay 1.89% a year over inflation.
- Current prices are known – for their living standard, for stocks, bonds, gold and housing.
Their retirement income need rises with inflation. For that need there is a "risk-free"† option: buy the 10-year UK index-linked gilt. Held to maturity, it delivers an inflation-adjusted amount on a known date, and unless the UK Government defaults, the promise is kept. It is the smallest risk this investor can take relative to what they are actually trying to fund – and it currently yields 1.89% a year above inflation.
That is the benchmark. Not a stock index, not "the market", not a peer group of funds. The lowest-risk way of meeting your purpose is the thing everything else has to beat.
Judge everything else against that benchmark
If the smallest risk yields 1.89% a year relative to your benchmark, then bigger risks need to promise materially higher returns before they are worth entertaining.
For this investor, the conventional (nominal) gilt is out of the picture. It introduces a risk against inflation – the income is fixed in cash while the need is not – for zero incremental expected return over the linker once inflation is priced in. Unless, of course, they hold a particular view on inflation. Then it becomes a bet, and should be sized like one.
Stocks, housing and the rest may well be good alternatives. Whether they are depends on the investor's expectations for them – but it also depends on the benchmark. The same stock portfolio is far more attractive when the "risk-free"† option yields 0% a year over inflation, or even a negative real yield as it did for most of the 2010s, than when it yields 1.89%.
Put numbers on it. Take a stock portfolio with an assumed long-term average return of 7% a year and volatility of 15% a year. With real yields at 1.89%, the probability that it beats the linker-based target after ten years is roughly 63%. With real yields at 0%, that probability is about 77%. Same stocks, same assumptions about the stocks – the only thing that changed is the benchmark. At today's linker yield the risk the investor is taking relative to their target is significantly higher than it would have been a few years ago, and that holds even over long horizons.
The conclusion follows directly: the share of risk assets in a portfolio should be allowed to fluctuate as the benchmark moves. That is not market timing in the usual sense. It doesn't require a view on where stocks are going next. It requires only that you compare what you can lock in against what you would have to hope for – and that comparison can be made on any given day, from published prices.
What this means in practice
You will probably not "beat" the market, and this approach doesn't try to. What it does is tell you which markets you want to be in, in what proportion, because they match your needs – and it tells you when a lower-risk route to the same goal has become good enough that the extra risk isn't paying.
This benchmark is the starting point for how Allocatewise models a plan. It doesn't forecast markets or rate any asset. It takes your dated goals, prices the lowest-risk way of funding them off the live gilt curve, and shows how a portfolio of your choosing compares against that – as a probability of meeting the goal in today's money, not a headline figure for 2046. Which assets to hold, and how much risk to take against the benchmark, remains your decision. It isn't advice: if what you need is a decision about your own money, MoneyHelper offers free, impartial, government-backed guidance, and a regulated financial adviser can advise you properly.
If you want the method behind it, read how to align your investments with your real-life goals. For why index-linked gilts are the natural benchmark for an inflation-linked need, see how to protect a portfolio against inflation.
† "Risk-free" is used here in the inflation-relative sense, and it holds only for a gilt held to maturity. Gilts are issued by the UK government, which has never defaulted on a gilt, though that is not a guarantee of future performance. The market price of an index-linked gilt can go up or down, but unless the UK Government defaults it will deliver the promised inflation-linked cashflow at maturity. A gilt sold before maturity may return less than was paid for it, so the term does not mean the value cannot fall.
Not regulated by the FCA. Not financial advice. The simulation and the probabilities above are illustrative calculations on stated assumptions, not forecasts; past performance is not a guide to future returns. Yields quoted are as at the time of writing (September 2026) and change daily. Nothing here is a recommendation to buy, sell or hold any investment. The value of investments can fall as well as rise and you may get back less than you put in. If you want advice on your own portfolio, speak to a regulated financial adviser; MoneyHelper offers free, impartial guidance.
Sources
- Bank of England – UK nominal and real (index-linked) gilt yield curves, daily estimates – bankofengland.co.uk
- UK Debt Management Office – gilts in issue and index-linked gilt methodology – dmo.gov.uk
- State Street – SPDR S&P 500 ETF Trust (SPY), fund information – ssga.com
- BlackRock – iShares 7–10 Year Treasury Bond ETF (IEF), fund information – ishares.com
- EODHD – historical price and dividend data for SPY, IEF and gold spot (XAUUSD), used for the simulation – eodhd.com
- MoneyHelper – free, impartial government-backed money guidance – moneyhelper.org.uk