Is it possible to time the market?

Can you time the market? In my opinion, you just cannot time the market. Today we will explore this topic first conceptually and then with a detailed example taking S&P 500 data from 6,848 trading sessions from 1988 – 2015.

Let us first understand this conceptually – there are millions of players (traders, investors, institutions) in the stock market and what is it that you know/ can analyze that none of them has already done? So, in my opinion, markets are almost always trading at a fair value.

For a long term disciplined investor, it hardly matters whether he/ she attempts to time the market or just keep buying regularly without worrying about the highs and the lows.

Time the market

To illustrate my point mathematically, I took S&P 500 total index from 6/1/1988 to 7/31/2015.

As soon as I had the data in Excel, I could not resist the temptation to see how much S&P 500 has returned over this 27 years 2 month period (we could call it 27 years from now on for simplicity). The answer is 10.3% – S&P 500 returns have averaged 10.3% over these 27 years (1988 – 2015).

Now coming back to people who want to time the market – there are many professionals around me who keep Continue reading