Some concepts of investing may sound cliched but remain timelessly effective and hence need to be reiterated and reinforced repeatedly. If it comes with a nice narrative with analogies, it becomes even more effective in driving home the point. Here’s one such piece about market timing or rather the futility of it, by Arun Kumar, the head of research of FundsIndia, an online wealth management firm. Whether it is clients or news anchors, we are often bombarded with the same question about whether it is the right time to invest or how do we see the markets in the near term? We humbly submit that we have no idea and it shouldn’t matter in the long run. But the author provides a nice analogy of a missing non-existent goat in a funny high school prank ‘to the perennial attempt to predict the market in the short run.’
He then asks the question “Can you name five investors who have ‘consistently’ identified bear markets, stepped out before the fall, and entered back at the bottom?”
He then shares some invaluable quotes from legendary investors about market timing:
“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently.” —Jack Bogle
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” —Peter Lynch
“The years ahead will occasionally deliver major market declines—even panics—that will affect virtually all stocks. No one can tell you when these traumas will occur.” —Warren Buffett”
He then concludes with a simple yet brilliant summary:
“Inevitably over the years, I have realized that the mistakes done trying to avoid a market decline is actually more damaging than enduring the actual market decline. If 2020 has taught us all one thing, it’s that no one—no one—knows what markets will do in the short run.
While our inevitable search for ‘Goat Number 3’ continues, we unfortunately forget to take advantage of the three existing goats completely under our control.
1. Optimism: Belief in entrepreneurs and human ingenuity
2. Long-time horizon: Patience to let compounding do its magic
3. Capacity to suffer: Ability to endure temporary declines”
He then asks the question “Can you name five investors who have ‘consistently’ identified bear markets, stepped out before the fall, and entered back at the bottom?”
He then shares some invaluable quotes from legendary investors about market timing:
“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently.” —Jack Bogle
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” —Peter Lynch
“The years ahead will occasionally deliver major market declines—even panics—that will affect virtually all stocks. No one can tell you when these traumas will occur.” —Warren Buffett”
He then concludes with a simple yet brilliant summary:
“Inevitably over the years, I have realized that the mistakes done trying to avoid a market decline is actually more damaging than enduring the actual market decline. If 2020 has taught us all one thing, it’s that no one—no one—knows what markets will do in the short run.
While our inevitable search for ‘Goat Number 3’ continues, we unfortunately forget to take advantage of the three existing goats completely under our control.
1. Optimism: Belief in entrepreneurs and human ingenuity
2. Long-time horizon: Patience to let compounding do its magic
3. Capacity to suffer: Ability to endure temporary declines”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
