The Indian stock market has gone through a brutal correction in the past two weeks. It is not uncommon to see pictures like these splashed all over the business news channels and news papers.
Blood bath on Dalal Street
Bears take hold
Has this contentious bombardment of negative news, coupled with blood red splashed all over your portfolio, gotten you wound up like a “Jack in the Box”, ready to spring up and take some action? Do you believe that the economy is going to hell in a hand basket.
Should you give in to this itch and take some action? History says not.
Jack Bogle famously said “Don’t just do something, stand there”.
Media sells sensationalism – nobody wants to hear undramatic news.
I know I am not panic selling in this market, it might, in fact, be a wonderful time to accumulate. But, many people feel that they can time the market – i.e. buy low & sell high. Empirical evidence doesn’t seem to attest to people’s ability to time the market consistently. But if you still feel that you are better than “the rest” and that you possess some magical ability to time the market, Quartz has come up with a wonderful game to test your ability. I would like you to try out the game 20 times in a row. Why 20? To neutralize the luck factor. If you are really skilled at timing the market, you should at least be able to beat the market 12 out of the 20 times. Let the games begin! All the best! Excerpts from the Quartz article/ game below.
Do you think you can beat the market? Really?
Let’s pick a random 10-year history of the S&P 500 and see if you can spot and avoid the downturn, as the chart progresses through time below.
You’ll start with $10,000 invested. Hit “Sell!” when you think that you should take your money out of the market. Hit “Buy!” when you want to get back in. Quartz economics reporter Matt Phillips will taunt bark reminders your way. Be careful, in this game you can only buy and sell once.
Click here to play the game!Since 1978, there have only been 126 weeks where a portfolio matching the S&P 500 closed lower 10 years later. Buying and holding the S&P 500 over the long term has shown to average 7% annual returns after inflation.
As you probably encountered in the game, timing trades to “buy low, sell high” is hard, if not impossible. Stock values are volatile—as we’ve been reminded of this week.
Pulling your money out of the market during a downturn might save you from losses in the short term, but you could also miss out on a rebound if you don’t reinvest soon enough.
Source: https://qz.com/487013/this-game-will-show-you-just-how-foolish-it-is-to-sell-stocks-right-now/
If you are able to time the market (buy low & sell high) consistently, you might want to teach me how you did it. May be I can replicate it in real life 🙂
Leave your thoughts/ results in the comments section.
Until next time.
The Thoughtful Investing Blog 