Share Market Timing Is Hard
Financial Advice

Share Market Timing Is Hard

For investors in equities, or considering purchasing equities, the current environment of massive market swings is creating much angst. What is ahead of us? Do we head to the safety of property, cash or even gold? Share market timing is hard.

In this article we attempt to provide some answers, insights and some very credible advice from Shane Oliver, Chief Economist and Head of Investment Strategy at AMP.

The wall of worry

There is always something for investors to worry about. And in a world where social media is competing intensely with old media it all seems more magnified and worrying. This is arguably evident now in relation to coronavirus uncertainty. The global economy has had plenty of worries over the last century, but it got over them with Australian shares returning 11.5% per annum since 1900, with a broad rising trend in the All Ords price index as seen in the next chart, and US shares returning 9.6% pa.

Key message: 
Worries are normal around the economy and investments and sometimes they become intense – like now. But they eventually pass. For example, back in mid-January it seemed the bushfires, smoke shrouding our cities and regular news of homes and lives lost would never end. But when I went to regional NSW in the last week it was lovely, green and wet. And so, it is with coronavirus – this too will pass, eventually.

Timing is hard

The temptation to time markets is immense. With the benefit of hindsight many swings in markets like the tech boom and bust and the GFC look inevitable and hence forecastable. So it’s natural to think why not switch between say cash and shares within your super to anticipate market moves?

This is particularly the case in times of emotional stress like now when all the news around coronavirus and its impact on the economy is bad. Fair enough if you have a process and put the effort in. But without a tried and tested market timing process, trying to time the market is difficult.

A good way to show this is with a comparison of returns is if an investor has fully invested in shares versus missing out on the best (or worst) days. The next chart shows that if your investment is totally in Australian shares from January 1995, you would have returned 8% pa (with dividends but not allowing for franking credits, tax and fees).

If by trying to time the market, you avoided the 10 worst days (yellow bars), you would have boosted your return to 11% pa. And if you avoided the 40 worst days, it would have returned close to 15.8% pa! But this is very hard, and many investors only get out after the bad returns have occurred, just in time to miss some of the best days. For example, if by trying to time the market you miss the 10 best days (blue bars), the return falls to 6.1% pa. If you miss the 40 best days, it drops to just 2.2% pa.

Key message: trying to time the share market is difficult.

Full Article by Shane Oliver

Summary & Assistance

“If you would like to consider your specific circumstances and strategies, then contact MB+M for a discussion with one of our team of Ozplan Financial Services licensed financial advisors.

Our licenced advisers can provide investors personal advice on the construction of a suitable direct share portfolio, or simply assistance with executing buying or selling shares on their behalf.

We live by our promise of “making your life easier…’ and would endeavour to do that for you. Call 03 58311233 “

MB+M- OZPlan Wealth Creation Team


This publication has been compiled by OzPlan Financial Services, ABN 35 005 391 202 AFSL 221235 and is current as at time of preparation, April 2020.

Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information and any advice in this publication do not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication.

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