Market Timing
Source: https://www.valuewalk.com/2014/07/market-timing

Today I came across an interesting article, a post by Military Money Manual on How to Time The Market. I thought this article is worth a shout-out, but then you can't give shoutouts here without being blamed for plagiarism.

This is in contrast with my previous post Can I be a Millionaire with just saving $2 a day? and so I would like to quote the great example and work in this article and insist upon my idea of this wonderful investment strategy.

So here are my 2 cents for the article, I hope I will be blamed for just the cents I put in!

The article goes about telling us a story of 3 friends, I will call them Person A, Person B, and Person C. Each one of them started investing in the stock-market from 1979 up until 2019. To summarize, they all invested $96,000 over the period of 40 years. They all followed a different strategy and in 2019, the results were rather surprising.

Person A and Person B are smart, they both know that markets are volatile, and it's best to "Time the Market" and take profits when possible. Person C is lazy, not much into selling, and does not have energy or time to time the market.

Person A, smart enough, has the patience to Hold and not panic and decided to save $200/month into a saving account earning 3% interest while waiting for a market opportunity to buy the stocks at the best time. Person A, unfortunately, puts all the money she saved altogether, into the market around 1984 (she didn't invest in 1979, but saved for investment). Then comes the 4 major crashes in the market between then and 2009. Person A repeats the same behavior of saving and putting into the market the same way.

Person A did not panic and managed to turn $96,000 into $663,594 over the period of 40 years. Even with bad timing, by just holding the stocks over a long period of time.

Person B is very smart, she knows buying bottoms and selling tops was a great strategy. Who would argue that buying low, selling high is the best thing one can do. She also invests her savings in one go like Person A, saving all money in the bank until it's the perfect time to buy! And trust me, she had the world's greatest timing and she always managed to buy low and sell high!

Person B had great timing and discipline and does not hold over a long period of time too. Person B managed to turn $96,000 into $956,838.

Person C is very slow, like the turtle in the rabbit and turtle story. Person B has a stamina of investing $200 every month and she does it for the next 40 years. Not really worrying about crashes, and market all-time highs. This gives her an opportunity to buy lows and buy highs. Person C does not check the account performance every day, rather he/she just setup an auto-investment of $200 and forgot about it for the next 40 years.

Person C with her habit of slow and steady but consistent investments turned $96,000 into $1,386,429. That is over a million and nearly 1.4 Million United States Dollars.

My Take

Just like in my previous post about Can I be a Millionaire with just saving $2 a day? I have explained the power of compounding. A consistent investment of even $2-$5 a day could make you a millionaire in 30 years, and with all the ups and downs of the market, considering you were the unluckiest one, you could still end up a little shy of a million.

I would say, use your computer or mobile whatever you are reading this one, download Robinhood or WeBull right now, and set an auto-investment of $50 per week. They will even give you free stocks which could be worth a lot of money just to motivate you.

Huge shoutout to the original article and please go ahead please support the original work Military Money Manual on How to Time The Market.

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