My Sunday Washington Post Business Section column is out. As a follow up to our previous discussion of the World’s Greatest Trader®, this  morning, we look at the Worlds Greatest (and Worst) Market Timer®.

As we did last time out, we assumed magical powers for our theoretical trader, giving him the ability to bottom tick the market. Surprises aplenty follow.

Here’s an excerpt from the column:

“Over the past month, we looked at how you would have fared if you were an uncanny stock picker who consistently beat the market by 30 percent or so (What if You Were the World’s Greatest Trader® ? and World’s Greatest Trader Revisited).  As it turns out, capital gains taxes and other expenses take a giant bite. Even a very successful active trader barely keeps up with the long-term passive indexer.

This week, we consider: What if you were the World’s Greatest Market Timer?
Imagine: You, the individual investor, have an uncanny skill at timing markets and picking the lows. Your prescience allows you to buy near the bottom of every major crash. Anytime the market has a substantial drop, you manage to make a purchase of broad indexes at advantageous prices. Similar to the World’s Greatest Trader, you set up an online account, and then you are off to the races, timing markets with the best of them.

How would you imagine a trader with these skills would do?”

The answer turns out to be rather surprising . . .


Time, not timing, is key to investing success
Barry Ritholtz
Washington Post, August 24, 2014  

Category: Apprenticed Investor, Asset Allocation, Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “Time — Not Timing — is Key to Investing Success”

  1. b_thunder says:

    One word: JAPAN. 25 years on, 65% down from the top.

    P.S. that $184k total investment since 1970 that turned into $1.1 million – the median and average home prices in the USA were $23400 and $26600. How much of the gain was simply inflation? Yes, i realize that the vast majority of the money was invested AFTER Volker beat the inflation down, but this $1.1M isn’t what it used to be .

    P.P.S. You want the “millenials” to buy S&P500 and other index funds and stay “in” indefinitely? It’s very good for the business of asset management, i get it, but those millenials need to buy the shares from someone, right? So while the millenials enjoy the rewards over the next 30 years, someone else would have to “sit in cash”, right? Because for every stock buyer there must be a seller (unless companies revere stock repurchases en masse.) And then Mr. Ritholtz will write an article decrying those morons who sold their shares to the millenials. All you’d get is the increased velocity of money/transactions (aka inflation of share prices) leading to get another bubble like in year 2000, when people saw their shares of AMZN and YHOO go form $100 to 300, sell them, only to buy them back next moth for $600, leading to an epic 80% wipeout for the index and 95+% wipeout for many investors.

  2. Wayne The Philosopher says:

    I couldn’t get the link to your article to work, Barry.

    ADMIN: My bad, I fixed it

  3. TrailingStop says:

    Starting Year – Not Time – is Key to Investing Success?

    From http://www.fool.com/investing/general/2014/07/29/investing-luck.aspx

    If you invested $500/mo in the S&P 500 in every possible 20-year period, the total result varies from $57,264 (less than how much was put in) to $396,014 (a good annualized gain). If you instead invested the same way, but for every possible 30-year period, the total result varies from $135,188 (less than how much was put in) to $700,808 (again, a good annualized gain).

    Thus, if one cannot choose the starting year (since we don’t get to choose when we’re born), doesn’t it seem foolish to have expectations of returns? Or do we just irrationally ignore the negative return 20/30 year periods and make retirement plans only imagining the good periods? Doesn’t Kahneman say that humans ignore low probability negative outcomes and that doesn’t make sense?

    Am I not getting something? Thanks.