“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”
It is but close to impossible to ’time’ the market . Let’s analyze market data a bit more to explain this.
Below is table which contains details of the Performance of the Sensex over the past 30 years with return bands of ‘0% to 5%’.
The total number of trading sessions is 7251 trading days over these 30 years i.e. from 1ST JAN-1991 TO 30TH NOV-2020
Now let’s look at the performance of the Sensex within these’ return bands’ and how many times did specific performance events occur.
Below is the Sensex Performance Analysis over 30 years ; 7251 trading sessions.
In summary , this is what happened to SENSEX returns over the past 30 years!
• 56 days out of 7251 trading days – Sensex went up by more than 5%
• 41 days out of 7251 trading days – Sensex went up between 4% to 5%%
• 123 days out of 7251 trading days – Sensex went up by more than 3% to 4 %
Therefore, over the past 30 years, The BEST performance of the SENSEX happened in just 220 days out of 7251 trading days i.e. only 3.1% of the time .
And we are trying to ‘time’ this small window of opportunity! It is indeed impossible to anticipate or predict such isolated events and invest accordingly.
‘TIME’ in the market VS ‘TIMING’ the Markets :
- TIME IN THE MARKET – Over the past 30 years, the SENSEX performance is 43 times or 13.49% XIRR!
- TIMING THE MARKET – What if you missed these 56days!
Remove the 56 best performing, the SENSEX performance for the same period will be just 1.17 times or 0.54% ONLY.
- TIMING the market – both up and down, is close to impossible. There is absolutely nothing certain about it.
- Trying to ‘TIME’ the market may cause huge losses and loss of investment opportunity.
- TIME IN THE MARKET – The best solution for financial success is to remain disciplined and continue your investments as per your financial plan and asset allocation.
This quote from the famous investor, Peter Lynch is indeed most relevant.
“I can’t recall ever once having seen the name of a market timer on Forbes’ annual list of the richest people in the world. If it were truly possible to predict corrections, you’d think somebody would have made billions by doing it”