Market Timing in the Long Run

Spring 2021, by the CIO office (NBC)


The timing of your annual savings investment is of utmost importance for the well-being of your portfolio in the long run.


The timing of your annual savings investment will make a difference in the long run, but it is far from being the critical factor many seem to believe. Case in point: consider an investor blessed with the power of perfect market timing (blue line) compared to another investor cursed with systematically picking the worst possible day to invest each year, over 30 years (red line). In the end, the market timing champion would have outperformed the most unfortunate of all investors by a mild 1.1%/year. If we take the more realistic example of an investor saving systematically at the beginning of each month, this annual outperformance shrinks below 1%. How is such a small gap possible? Simply because in the long run, the first year's return is superfluous. What truly matters is the frequency of savings and passage of time, not market timing. 

(data via Refinitiv)

The information contained herein was obtained from sources we believe to be reliable, but is not guaranteed by us and may be incomplete. The opinions expressed are based on our analysis and interpretation of this information and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed herein are those of the author and do not necessarily reflect those of National Bank Financial.


The securities or investment sectors mentioned herein are not suitable for all types of investors. Please consult your investment advisor to verify whether the securities or sectors suit your investor's profile as well as to obtain complete information, including the main risk factors, regarding those securities or sectors. This document is not a research analysis produced by the Research Department of National Bank Financial.


National Bank Financial is a subsidiary of National Bank of Canada. National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).

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