Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty – Who is the winner?

Among Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty Index, who is the WINNER? We all wish to invest only when the market is low and we all wish to withdraw only when the market is high. However, timing the market is impossible even for the GOD also. But still, as a human, we try to be accurate. Hence, let us see who is the winner among Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty 50 TRI.

Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty – Who is the winner?

For experimenting purposes, I took the Nifty 50 TRI data from Jan 2003 to Sep 2021. It is almost around 18 years of data. In this, I got around 4500 dates and respective Nifty 50 TRI Index Values.

Let us take the example of Mr.A. He will invest Rs.1,000 every month only when the market is all-time high during that particular month. Same way, Mr.B will invest Rs.1,000 every month only when the market is all-time low during that particular month.

Both Mr.A and Mr.B are market timers and they invest exactly when the market is down and up during those particular months from Jan 2003 to Sept 2021.

However, I took one more example of a person Mr.X who invest on the 5th of every month without bothering the market’s all-time highs and lows.

After plotting all of these three guys’ data for the last 18 years, the graph looked like it below.

Best Market Timer Vs Worst Market Timer Vs SIP Investor

The final values of SIPs as on 30th September 2021 for Mr.A is Rs.10,61,612, for Mr.B is Rs.11,57,4355 and for Mr.X is Rs.10,98,311. Obviously, you may say that the person (Mr.B) who invested only during the monthly low generated higher returns. Because the return difference is Rs.95,823. However, if we calculate the XIRR of all these three investors, the results are as below.

Mr.A’s XIRR is 14.9%

Mr.B’s XIRR is 15.6%

Mr.X’s XIRR is 15.04%.

It is easy to look at history and show that one is investing at low and at high. However, the real-life is entirely different. As I told you above, even GOD can’t predict the exact market highs and lows. Even if someone is trying to predict 100%, you noticed that the results of the last 18 years are in front of you.

Few may question why the 18 years data and why not beyond that? The Nifty 50 TRI data is available for me from 2003. Hence, I calculated from that period. Regarding the selection of 5th as the date of SIP for Mr.X is also random and there is no logic to select this particular date.

The purpose of this post is to highlight that NONE can time the market perfectly. Instead, use equity for your long-term goals with proper asset allocation by investing CONSISTENTLY. After looking at this past 18 years’ data, what you have to follow is – AVOID NOISE, BE CONSISTENT and MANAGE RISK at your level.

19 Responses

  1. Apologies, I don’t fully agree with this analysis. In the context of Jan 2003 to Sep 2021, a market timer would be one who makes lumpsum investments during the crash period such as 2008, 2020 and all other scenarios wherein the market would have corrected by 20%. Selecting the peak, low and fixed date in the context of the same month is a narrow range. Although I have not done the math, I would assume a person who would have deployed the same amount of capital during the crash period might be better off.

    1. Dear Prashant,
      This is not for those who have lump sum and trying to time the market. It is for those who are searching for the BEST day to invest every month through SIPs. For your information, even in case of lump sum, NONE on this earth can predict the future market. What matters is your consistency and long term view.

  2. Thanks for your insights. Really admire your work. Thanks for sharing very useful info to keep believe to stay invested even during hard times.

  3. Dear Basu Sir,
    Superb analysis, well written. Very informative article. message is very clear, “Never time the market”
    Thanks and regards

  4. Very good information shared.
    You done exercise for index fund.!.
    You assumed that all stocks behaving with it’s index.
    If selected stock with good RSI value, yield more, I guess..

  5. Hi Mr. Basavraj

    Fully agree with this analysis. It’s really a futile exercise to time the market.

    What an Article this is… Amazing Insights to those who want to understand….

    Is it RIGHT TIME to buy?

    Timing the Market is futile exercise… If it was possible to TIME it CONSISTENTLY, then all Fund Managers/ Big Investors would hv become Billioners within 1-2 market cycles itself. In fact, who will loose money if everyone can TIME is successfully?

    As no one can do it consistently, the best thing is to become systematic at investing. That’s thr ou thing which is in your control.

    As u can see the data in this Article, the sysematic investors generate just slightly less income than those super informed magical investors.

    If u know how to time it basis extra knowledge, do it occasionally for experimentation purpose and see ur success ratio of timing v/s systematic investing… Be opportunistic to time it occasionally if u hv knowledge n time both to spare on this purpose. Else be systematic with Asset Allocation, Diversification in Non Corelated Assets, Review n Rebalance in a Year…. That’s it… U r done with it.

    Spend rest of the time in upgrading urself, spend time with family, spend time with ur hobby… This wl give u an edge.

    PS: I could time Entry n Exit for my NPS Account just for sake of Experimentation.

    I could time market peak of Jan-20 with overvalued market n moved out of Equity to Debt…

    And I could also time the bottom of market in May-20 to move back again into Equity.

    But I missed the subsequent rally of 2021 onwards because it was not logical for my reasoning. Then I realized that my reasoning was different than collective reasoning of so many investors (I.e. reasoning of Mr. Market. And u cannot do anything but to respect collective wisdom of market). Thus, my success ratio of timing stands 2/3= 66%…but this is not due to my skills… This is sheer luck of connecting my decisions with macro n micro situations)

    Still my NPS Tier-1 Account XIRR stands at close to 25% just with 50% Equity + 50% Debt. This is quite generous number with modest equity allocation (of conservative large cap portfolio) and higher than almost majority of the folks.

    I did all this just for learning purpose n realized that this is a futile exercise untill u want to spend huge time (TIME is actually a money & most of us don’t realize that we are spending it on futile things just for the sake of proving wrong arguments).

    Enjoy the Article n Follow Right Advise. I hv been follower of your Articles n love the way u give independent views to novice investors in right direction.

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