Premium Value Investing NewsletterDownload Free Issue

The Greatest Market Timer in This World is…

Markets are up, again. The BSE-Sensex is up almost 1,100 points over the past three weeks. Even other global markets have staged a comeback.

For now, the co-ordinated plan of international policymakers to lend cheap dollars to European banks to tame the credit crisis seems to be doing the trick.

In short, the bad news seems to be past us, at least for the time being.

But, as the song goes…

Who knows what tomorrow brings
And heavens only knows what’s on the other side of the rainbow
All I know is what the seasons bring
And even with the seasons come uncertainty
Who knows
Do you know
I don’t know

So we, at Safal Niveshak, don’t know what the season might bring for the stock markets in the near future.

But throughout this painful stock market collapse – the Sensex is still down 19% from its November 2010 highs – we have resolutely stuck to one over-riding message. And it is that…

Investing in stocks should be like a marriage and not a one-night stand or even a short-term affair. This is the only way you can take control of your own money, and therefore your own financial future. There’s no way you can time the market. So stay away from those who are trying to do it in vain. Over the long-term, your discipline will be rewarded.

Yet not everyone shares our beliefs…

I met this gentleman, a middle-aged private sector employee and a trader in stocks, a few days back when the market was in deep despair.

This is what he had to tell me, “Who believes in this ‘buy and hold’ thing? In the long term, we all are dead! In fact, I believe those who buy and hold generally make very little or no money. Instead, if investors are able to time the market well, sell when the market is crashing and buy back at some point near the bottom, they can earn great returns.”

Well, this is not a common suggestion that I’ve heard from people. But the interesting thing is that such views are generally aired when the market is down, as it has been recently.

Let me point out why this type of thinking is not only wrong but dangerous.

But first let me tell you about…

The greatest market timer in this world…
Well, I don’t know who he is! Do you?

In fact, if I go by the numerous studies that have been conducted by researchers in the past, one thing comes out very clear – Market timing is hazardous to your wealth…in fact, very hazardous.

And forget the studies. Just look at the history of stock market investing.

If I ask you the name of one great buy-and-hold investor, you’ll have names like Warren Buffett, Benjamin Graham, Peter Lynch, and Philip Fisher up your sleeves.

None of these investors made their fortune by predicting where the market is going or by predicting its tops and bottoms.

Instead, they found great companies at fair prices and held most of them for a long time.

But now, let me ask you – Can you name the history’s greatest market timers?


I’ll bet you can’t come up with one single name.

That’s the point!

Timing the market hasn’t been a viable way to generate wealth from stocks. In fact, people who try to time the market not only lose their wealth, but are also rendered into the oblivion (and that’s why we don’t know their names!).

So, to repeat again, your philosophy to create wealth from the stock markets must be to make it a lifelong endeavour, a marriage, and not a one-night stand.

Take control of your own money, and therefore your own financial future.

The truth is that you can never time the market. Nobody can!

So don’t panic when all around you are trying in vain to do so. Over the long-term, your discipline will be rewarded.

Got it?

Tell us in the comments below or on our Facebook page whether you believe in the ‘buy and hold’ way of investing in stocks, or whether you are the ‘market timing’ types.

Moving on to a big corporate news of the week, the Indian software major Infosys is looking to acquire the healthcare business of Thomson-Reuters in a potential US$ 700 m deal.

There has been a lot of discussion over the past 2-3 years around how Infosys must utilize its huge horde of cash. Some investors have asked the company to pay a large special dividend, while there are others who have pestered it to become more aggressive in acquisitions.

Anyway, what is the most profitable way in which Infosys must utilize its cash?

  • Is holding so much cash really justified?
  • Should it pay out a big special dividend?
  • Should it go in for acquisitions?

I’ll look at answering these questions on Monday.

So stay tuned, take care, and have a great weekend.

Print Friendly, PDF & Email

About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Speak Your Mind