Here’s a lesson on investing from the worst market timer in history
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:
- He could only invest in the S&P 500, and all dividends would be reinvested.
- He couldn’t withdraw money until turning 91 or look at his balance once the money was invested.
- 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- This was an overly simplified example (i.e., no taxes, fees, etc.), and many would have withdrawn earlier, but it teaches something important…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.