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Today at a Glance:
Lesson From the Book: Time in the Market > Timing the Market
Tweet: Buffett Invests in Nebraska Furniture Mart (Case Study)
Quote: Psychology
Snippets: Lessons from Losses, & Business Valuation
You Have to Time the Market to Earn Respectable Returns
Over the past 90 years or so, the U.S. stock market is up nearly 10 percent per year. That number includes periods of high market valuations and low valuations and rising and falling inflation, with short-term interest rates as high as 15 percent and as low as 0 percent. It includes many manias and panics, including the Great Depression, a recession roughly every five years, World War II, the tech bubble, and nearly one hundred 10 percent corrections.
Legendary mutual fund manager Peter Lynch performed a stud/with Fidelity Investments that looked at the 30-year period from 1965 to 1995 and found that if you invested every single year at the lows in the market (the lowest day to be precise) you would have earned a return of 11.7 Percent Return Annually.
Had you been the unlucky sort, the Jackie Gleasons of the world as Lynch put it, and picked the high day every single year to put your money to work, your return would have been 10.6 percent. On the other hand, if you would have kept it simple and put your money to work on the first day of the year and not tried to guess one way or the other, you would have earned 11.0 percent per year. The odds of consistently picking the best and worst days are minimal, but putting money into the markets on a periodic basis is something every investor can do. So much time and energy is put into trying to figure out the best time to invest when a simple dollar-cost averaging plan with a long time horizon is much less stressful and easier to implement.
There was another study done that looked at 237 market-timing newsletters. These newsletters send buy and sell signals to their par tog customers. The results of the study found that the market timing calls were right less than 25 percent of the time.
Source: A Wealth Of Common Sense
One Tweet
Case Study: Buffett Invests in Nebraska Furniture Mart
One Quote
All past declines look like an opportunity, all future declines look like a risk.
– Morgan Housel
Interesting Books Snippets shared during the Week
1. Key Learning from losses and big misses (Ramesh Damani)
2. It's not what you buy. It's what prices you buy
3. Life pushes all of us around