Time in the market vs timing the market

Lame joke: what’s the difference between Time in the market vs Timing the market, besides the spelling?


Time in the market is putting your money to work in the market regardless of current market condition. Letting growth and inflation to grow your money in the long term.

Timing the market is trying to buy low and sell high, looking at the market opportunities to buy cheap stuff and selling the expensive ones.

There are many explanations out there that explains all this. It is not something new:


Click to access time_in_the_market.pdf




We have already established in the Malaysian case, only 30% of Fund managers are able to beat the market after fees. And these are the industry experts who supposedly can time the market.

If only 30% of experts, backed up by team of analysts, working on a problem 24/7, studying vigorously through out their university and postgraduate lives, can beat the market, what is the proportion of individual retail investors, without background, without experience, without fundamentals that can beat the market?

The answer, of course, should be less than 30%. However, when about investment, a common response is that:

“The market is up”

“The market is down”

“Brexit going to happen, wait for cheap valuation”

“Brexit already happen, too expensive to go in now”

“Oil price is low, cannot go into the market yet”

“Oil price is high, bad time to masuk”

“Bank Negara going to hike rates, wait for it to over lar

“Bank Negara just hiked rates, too late already lar”

etc, etc.


So what actually is the retail investor doing? Yup, they are Timing the market. They are doing exactly what research and data is telling them NOT to do.

The first lesson about personal finance is actually overconfidence/confirmation bias. We all think we do better than we actually do. We all think we can actually time the market.

A common example used to illustrate this is the driving survey. When asked who drives better than average, almost everyone put up their hand ~ 80% of people say they did better than average. But that is impossible! Average means 50%, It cannot be 80%.

And research shows that people tend to read about things that support their point of view. Case in point, when holding an oil and gas stock, an investor will tend to read about how Saudi Arabia and Russia is going to sit down and talk about freezing production, and ignore the news that Iran is coming back onto the oil market or how US shale gas rig count is rising.

As Financial Planners and Advisors, we always advocate practising discipline and using a systematic approach to overcome these behavioural biases when investing. We need to think rationally and take calculated risks based on data.

So the next time you think about timing the market, do remember the above and think about why you think this way. Is the basis of the thinking fundamentally and factually supported?

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