Stockwatch: Counterintuitive tale of an investor with terrible timing

People with a lump sum to invest invariably ask: what if I invest right before a market crash? Don’t worry about it if you have time on your side, says Compound Capital Advisors’ Charlie Bilello.

Bilello did the maths on the “worst timer in the world”, someone who invests only at market peaks. Our hypothetical investor, the appropriately-named Wally, inherits $130,000. Nervous, he invests $10,000 in August 1956, immediately before a peak from which stocks fall 21 per cent.

Burned by the experience, he waits until December 1961 to invest another $10,000 — right before stocks swoon 29 per cent. This pattern is repeated endlessly over the next 60 years, with Wally only investing at 11 bull market tops between 1966 and 2020.

How did he do? Not bad – at the end of 2021, his $130,000 investment is worth $18.6 million. Now, readers might protest they don’t have a 65-year investment horizon. Still, most pension fund investors are taking a multidecade view, so it’s consoling to remember that time in the market really is way more important than timing the market.