Wise Wealth Advisors

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

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Peter Lynch on market timing

Posted by Muthu on November 19, 2017

Peter Lynch was one of the best fund managers. He managed a fund called Fidelity Magellan Fund for 13 years, between 1977 and 1990. $1000 invested in 1977 in his fund has become $28,000 in 1990. Money multiplied by 28 times in 13 years, annualised return of 29.21%

I was reading one of his interviews today. Thanks to @stocknladdr  for sharing the link. As you know, we are always against market timing. In our opinion, you should invest when you have money and redeem when you need money, ensuring at least there is a 10 year time period in between.

Peter Lynch has provided a study on market timing. Let us listen to him in his own words.

“People spend all this time trying to figure out “What time of the year should I make an investment? When should I invest?” And it’s such a waste of time. It’s so futile. I did a great study, it’s an amazing exercise.

In the 30 years, 1965 to 1995, if you had invested a thousand dollars, you had incredible good luck, you invested at the low of the year, you picked the low day of the year, you put your thousand dollars in, your return would have been 11.7% compounded.

Now some poor unlucky soul, the Jackie Gleason of the world, put in the high of the year. He or she picked the high of the year; put their thousand dollars in at the peak every single time, miserable record, 30 years in a row, picked the high of the year. Their return was 10.6%. That’s the only difference between the high of the year and the low of the year.

Some other person put in the first day of the year, their return was 11%. I mean the odds of that are very little, but people spend an unbelievable amount of mental energy trying to pick what the market’s going to do, what time of the year to buy it. It’s just not worth it.

Excellent timing returned 11.7%. Lousy timing gave 10.6% and disciplined investing provided 11%. Always keep this in mind and stay the course.

Wishing you a wonderful week ahead.

5 Responses to “Peter Lynch on market timing”

  1. bvmallikarjunrao said

    Very good analysis. For great or good returns only simple way is disciplined investing. I have one query is size of funds aum matters.

    • bvmallikarjunrao said

      I have one query is size of funds aum matters.
      If not then why HDFC EQUITY, ICICI PRUDENTIAL VALUE DISCOVERY FUND & AXIS LONG TERM EQUITY underperforming.

  2. Atul naik said

    Not all investors can remain invested for 30 yrs. Investment horizon maybe 10 or 15 or 20 yrs. Person who invested in late 2007 as lumpsum what is return in 2017?(in India)

    • Abu said

      You have chosen a convenient date(late 2007). Ask yourself how much it would have been worth if you had chosen to invest in late 2008? It proves what Muthu always says, you just can’t time the market and hence SIP makes ample sense.

  3. Sundaram said

    Interesting contra view in below mentioned article.
    https://www.ofwealth.com/buy-indian-stocks/#.WDg14aVX7qB

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