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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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The difficulty of timing the market

Posted by Muthu on October 7, 2014

At every available opportunity, we keep reinforcing the need to invest regularly for long term without timing the market.

In today’s newspaper, I saw an advertisement by HDFC mutual fund and felt like sharing the data published in the same with you.

Let us assume you invested Rs.10,000 in Sensex on January 1’st 1990 and stayed invested till September 30th 2014.

Your money would have multiplied 34 times providing an annualized return of 15.30%.

In these 25 long years, if you’ve missed just 10 best days of the market, your money multiplied only by 12 times, giving an annualized return of 10.73%

If you’ve missed the best 20 days, the returns would be on par with fixed deposits; your money multiplying by 6 times, giving an annualized return of 7.65%

If you’ve missed the best 30 days, the returns would be on par with what some banks offer for SB A/C; your money multiplying by 3 times, giving an annualized return of 5.09%.

If you’ve missed the best 40 days, you barely scraped through with a positive return; your money multiplying by 2 times, giving an annualized return of 2.78%

In fact, in the last 3 scenarios, you wouldn’t have beat inflation- which means your real return is negative.

The best way to build wealth is to choose a long term (not less than 10 years), invest regularly and stay invested for the entire tenure. Hopping in and out of the market can make you miss some best days which would significantly dent the returns you would have obtained by simply staying the course.

Always remember what John Bogle said:

“Stay the course. No matter what happens, stick to your program. I’ve said ‘stay the course’ a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.”

6 Responses to “The difficulty of timing the market”

  1. Invert, Always Invert.

    Please also see what will happen if you avoid the worst 10 days, 20 days…

  2. Came across the following – best days and worst days cancelled out.


    So it seems that ‘missing out best days’ is just a one sided story.

    Also, what leads to best days? Cheap Markets? What leads to worst days? Expensive Markets?

  3. milan said

    Thanks for the information. I will make sure that I stay invested for atleast 10 years.By the way, should we switch funds if we are not happy with the overall returns of it compared to other funds.

    • Muthu said

      There would be temporary under performance in almost all funds. So there is no need to switch because of the same. If there is any fundamental detoriation in fund or fund house which can have long term negative impact, then you may consider switching. In most cases, the best thing is to do nothing and stay the course.

  4. Rahul S said

    which scheme of HDFC MF

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