Is it wise to time the market?

Since demonetization hit in November 2016, the market has jumped significantly. 2017 was a blockbuster year for Indian equities, it jumped as much as 35%.

In 2018, the market had something different in store .

Ever since January 29, 2018, the market started to slide significantly.

The fall intensified over the course of the year on account of multiple developments such as the reintroduction of LTCG tax, missed opportunities from the Union Budget, Karnataka elections, fed rate hike and many more.

These developments had weighed significantly on the small and the mid-cap segment of the market and analysts opined that the market would continue to correct given premium valuation.

This time, the market surprised us again.

There was recovery in corporate earnings, strong GDP growth number, upgrade in India’s sovereign rating, relations were improving with the international community.

All of these things helped the market rebound.

At a time when foreign institutional investors (FIIs) are pulling out of India, domestic institutional investors (DIIs), led by Life Insurance Corporation of India, are investing in Indian stocks.

In fact, in August, DIIs have invested more than Rs 15,000 crore in equities, which is the highest monthly investment by them in six years.

Clearly indicating the changes in the macro environment.

What did you notice in the overall story, highlighting these two incidents?

Accurate prediction is impossible!

Can you predict the market?

Remember, not all analysts go right and not all analysts go wrong in their prediction. Remember there is no right or wrong understanding of the market.

It all depends on how you connect the developments of the global market and the domestic market with a futuristic view.

Thus, if we have to set the context of this article in simple words it would be – Do not try to time the market.

In this blog, we seek to discuss why it is not a wise idea to time the market.

There are some individuals who support market timing and there are some who are against it.

Critics say that it is nearly impossible to time the market and it is comparatively easy and better to remain fully invested rather than timing the market.

Ace investor Warren Buffet says –

“Market predictions can distract investors from making good stock purchases. I never have an opinion about the market because it wouldn’t be any good and it might interfere with the opinions we have that are good.

Buffet, the Oracle of Omaha, stated that market timing might be waste of time and hazardous to investment success.

Thus, it is definitely not possible to predict the market accurately and thus, timing doesn’t work always.”

We invite you to read what Buffet had to say about market timing back in 1994 by way of shareholders’ meeting of Berkshire Hathaway here.