Some time back , I went with my family to nearby multiplex for a movie. The movie, a thriller, had already received rave reviews and we couldn’t help but sneak into nearby multiplex to see for ourselves what the hype was all about. The movie is unpredictable, open to interpretation and the plot takes multiple twists and turn from start to end.
During the course of the movie I walked out of the hall 3 to 4 times to receive few important calls. While I ensure that none of these calls lasted more than few minutes each and I hoped back to my seat as soon as possible , these exits virtually marred my experience beyond description , By the end of the movie , while almost everyone leaving the theatre was going gaga about the movie’s gripping plot , I was clueless as to what the big deal about the movie really was.
Few months later , when this movie had TV Premier I decided to give another shot & guess what. I simple loved the movie and could finally relate with everyone around me who had loved the movie at theatre few months earlier.
What exactly happen that dramatically changed my opinion about this movie. Did the script, cast or movies climax change? No. what really did change was that second time around, I watched the movie in entirety without missing any scenes, unlike the experience at the theatre, where I walked out of a few scenes to answer phone calls.
By now, most of you would be wondering if any of this has any bearing on your wealth creation. Well, it does. While SENSEX has generated CAGR of 14% since 1990 , the journey was filled with short term volatility along the way . No wonder then that many investors would have tried to “time” their entry and exit in equities to avoid volatility and / or to maximize their returns and guess what, this could have marred their investment experience just like mine was at the movie, due to untimely exits .
Following statistics of Sensex (1st Jan 90 to 30th Sept 19) brings forth the cost one has to pay for unsuccessfully timing the market.
Assuming an investor started investing on 1st Jan 1990 , his investment would have yielded ~ 14% CAGR , if he had stayed invested up to Sept,14 . However, If the investor was not invested on 10 best days (Ranked by daily returns) , his returns would have come down to ~10% . If he had missed 20,30 and 40 best days, the returns fall dramatically to ~7.7% , 5.6% and 3.6% respectively .While 40 days may seem minuscule when one considers a history of ~7000 days , missing out on 40 best days , would have knocked off more than 10% CAGR from the investor’s returns .
As the old cliche goes “Nothing is more expensive than a missed opportunity “. In the world of investment, missing out on a few days even over a long span of time can make a huge dent in your wealth creation potential. You would do well to ensure that your investment experience is not marred by untimely exits, like my experience in movie.
At least I had the option of watching the movie again, as an investor do we have the option of rolling back the clock to recoup the best days our investment missed?
Disclaimer:- Equity Investment are subject to market risk , read all Scheme related document before Investing. Always Consult professional advisor before Investing