{"id":387427,"date":"2020-04-11T13:35:16","date_gmt":"2020-04-11T11:35:16","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=387427"},"modified":"2020-04-09T15:35:32","modified_gmt":"2020-04-09T13:35:32","slug":"the-problem-of-trying-to-time-the-market","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/387427\/the-problem-of-trying-to-time-the-market\/","title":{"rendered":"The problem of trying to time the market"},"content":{"rendered":"

Thomas Robert Dewar, a Scottish whisky distiller from the 1800s, coined the phrase \u2018sometimes doing nothing is doing something\u2019.<\/p>\n

While Mr Dewar was referring to the whisky ageing process where the unique flavour is developed, the phrase also applies to investments, said Gyongyi King, chief investment officer at Alexander Forbes Investments.<\/span><\/p>\n

“Investors\u2019 emotions see-saw when markets go down. Their emotions could drive impulsive investment decisions that ultimately, like the event that sparked them, end in undesirable outcomes.<\/p>\n

“When markets crash, feelings of doubt and uncertainty intensify, and investors scramble to protect their hard-earned savings. This is when you see investors rushing to cash in their investments or to change their investment strategies \u2013 cash being the preferred destination.”<\/p>\n

But what if their actions are mis-timed, or market conditions improve and investors unintentionally miss one, two or ten of the best days in the market?<\/p>\n

What impact would this have on their investment over time?<\/p>\n

“Historically, we\u2019ve seen the markets recover significantly following drastic downturns. They often go onto post inflation-beating performance returns,” said King<\/span>.<\/p>\n

An example.<\/p>\n

The chart below is based on the South African stock market, represented by the FTSE\/JSE All Share Index from 1 April 2005 to 31 March 2020.<\/p>\n

It shows the impact on investments when investors try to time the market and, in the process, miss some of the market\u2019s best performing days.<\/p>\n

\"\"<\/a><\/p>\n