Here’s a lesson on investing from the worst market timer in history – The Average Joe

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    Here’s a lesson on investing from the worst market timer in history

    victorlei

    September 13, 2022

    If you suck at market timing, raise your hand. At this point, everyone’s hand should be up. But it’s okay; you can be bad at market timing and still make money…

    Meet Wally — the main character in Charlie Bilello’s hypothetical story.

    Wally is terrible at market timing. He would chase bull markets — constantly buying at the top and selling at the bottom. Guess what, he lost all his money.

    He later inherited $130,000, which came with strict rules:

    1. He could only invest in the S&P 500, and all dividends would be reinvested.
    2. He couldn’t withdraw money until turning 91 or look at his balance once the money was invested.
    3. He could invest the $130,000 whenever and as much as he wanted at once.

    But being the irrational investor he was, Wally would still only invest at market tops. Over 64 years, the $130,000 would be invested over 13 market tops between 1956 and 2020.

    The result: He turned his $130,000 into $18.6 million — a 143x increase at a 10.5% annualized return.

    • Even though he didn’t invest all his money at once and entered the market at the absolute worst times, he still walked away with a massive gain.
    • This was an overly simplified example (i.e., no taxes, fees, etc.), and many would have withdrawn earlier, but it teaches something important…

    The lesson: Time in the market is more important than timing the market.

    See the full story here on Compound Advisors.

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