Time in the Market is Better19 Mar 2020 15:04
Than Timing the Market
Wise words worth considering.
Peter Lynch has a very impressive record as an investor and mutual fund manager. He managed the Magellan Fund at Fidelity Investments between 1977 and 1990. During this period, the fund averaged an annual return of 29.2%.
This was greater than twice the return provided by the S&P 500 in the same period. Peter Lynch’s investment skills resulted in the assets under management of the fund increasing from US$20 million to US$14 billion.
How did Peter Lynch achieve this remarkable feat? Was it by investing in stocks at exactly the right time and then selling them when their prices increased?
On the contrary, he held that the greatest returns were to be made by investing for the long-term. He said, “Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they’re going to be higher or lower in two to three years, you might as well flip a coin to decide.”
Peter Lynch says that:
Holding investments for the long-term was the most effective strategy.
The price at which you bought a share was not important. How long you held it was what mattered.
To prove his point, he conducted a study that analysed the returns provided by the market over a 30-year period from 1965 to 1995. He found that if an investor had invested US$1,000 a year on the date when the market was at its highest every year for a 30-year period, he would have made a compounded annual return of 10.6%.
What if the investor had made the purchases when the market was at its lowest point every year? The return would have been only a little higher at 11.7%.
http://www.financialadvice.com.sg/investor-resources/financial-planning/time-in-the-market-is-better-than-timing-the-market/
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