I originally published this on my medium blog. Creating an archive here
I had come across this article by Ben Carlson about the worst market timer in the US markets. It was a very interesting post that had a hypothetical investor called Bob who only invested at market peaks before a crash. The post illustrated the importance of staying invested in the markets and how that would still end up giving decent returns despite investing at the worst possible time.
I wanted to try something similar for the Indian markets using the Sensex and see what is what. I highly recommend checking out the original post which is very well written and illustrates the point very well. I am just providing an Indian perspective here:
How Sensex returns would have fared if you invested only at peaks and faced the drawdowns that followed
As you can see from the above table, if an investor had the worst luck when it came to timing the markets, invested only when markets were at all time highs before they crashed due to some reason, he/she would still get decent returns. These are not mind-blowing at all, but when you think about all the chaos and turmoil that we see in the world, these numbers are respectable. It just shows that you should stay invested in the markets no matter what, India or US. This may not hold true for Japan, but you wouldn’t just be investing at market peaks, you’d be investing and averaging during other times and see good returns. Stay invested!
*This data does not include dividends and buybacks which would surely enhance returns even more. I did not include them because 1.) I don’t have the data and 2.) I am lazy.
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