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  • Bemi

The ONE Time When You May Be Able to TIME the Market

Updated: Jan 12, 2022

Timing the market is a fool’s errand, save for the likes of Warren Buffet and Ray Dalio, however there is ONE time when average investors may be able to TIME the market.

Upfront Disclaimer - Money Thoughts (this blog) does not offer financial advice and is meant for general educational purposes only. By proceeding, you acknowledge that you are using this site entirely at your own risk. I actively encourage you to carry out your own research and seek professional advice if you need to.

Psst … You Are Most Likely Already in the Market

You are most likely already in the stock market, whether you personally invest your money or not. This is because unless you are a public sector worker with a pension scheme similar to the NHS pension, or you are in an old style defined benefit pension scheme, your pension will probably be subject to the performance of the stock market. Later I’ll explain the relevance of this fact to the discussion. For now, I just want to grab your attention even if you’re not currently personally investing your money.

What does it mean to Time the Market?

The stockmarket is kind of like a specialist mental health hospital looking after stocks with bipolar tendencies. Company share prices will move up and down in unpredictable ways and even if you DIVERSIFY into BASKETS of company shares in a sector or tracking an index – these too will move up and down depending on market sentiment. What drives this crazy behaviour? You and I and millions of other human beings of course. If we were all robots, reacting with perfect information and pure logic, perhaps the fluctuations won’t be so crazy. Then again, what would be the fun in that? ……..

Straight from the plot line featuring Biff Tannen in the movie Back to the Future, what if you had a time machine that could take you to the past? You could note down all the major market movements that could have made you money, travel to the past and give it to your younger self. Your younger self would know exactly when to buy and sell shares. You could buy Amazon shares for $1,785 on 13th March 2020 and sell for $3,531.45 on 2nd September 2020. What the heck? Why wait so long? You could find a volatile stock and go in and out and make money really quickly.

Timing the market is all about buying LOW and selling HIGH and then repeating the process. It means holding on to cash if you think there is an imminent drop in the market around the corner and then piling in when the market is at its NADIR (i.e lowest point). This could be done with any asset class (property, gold, shares, cryptocurrency, bonds, but this article is primarily focussed on shares as it’s relatively liquid – meaning you can cash out or buy-in with relative ease. I use the word ‘shares’ in the broadest sense to refer to individual company shares and ‘baskets’ of shares in the form of mutual funds, index trackers, exchange traded funds (ETFs) e.t.c

Why Can’t I Time the Market?

Timing the market is something that a lot of investors will try to do at some point in their investment journey… ME included. Of course it won’t be called ‘timing the market’. Instead we’ll say that we’ve studied the economy and reached a certain conclusion or we’ll say stocks are overvalued and that there hasn’t been a correction in quite some time and therefore let’s hold cash while we wait for the market correction to happen. There’ll be many other reasons to either sell shares today because we think the market is too high or pile in because we think the price is too low.

Yet, conventional wisdom from those whose job it is to advise people how to invest their money is:

SUCCESSFUL long term investing is all about TIME IN THE MARKET and not TIMING THE MARKET

And I’m not talking about wisdom from unqualified and potentially foolish people like me and countless other bloggers and YouTube personalities. Nope, I’m talking about wisdom from REGULATED professional advisers. Generally that wisdom statement refers to well-diversified ‘baskets’ of shares though and not individual stocks.

So how do I square this statement with the odd person here and there who ‘apparently’ succeeded in predicting a market fall and therefore held cash, before putting their entire nest egg in the stock market at a certain time point and became minted? Maybe the clue is in the word ‘odd’. The unpredictablity of the stock market doesn’t mean that some cannot get LUCKY. The question is, for every 100 people, trying to do what this lucky person did at various points in the market over the last fourty years, how many would succeed in making money? 90%?... surely not… maybe 50%? Or could it be less than 5%? Unfortunately, I don’t know the answer. Would this lucky person be able to replicate their success over the next 10 years, by following what they consider to be their winning strategy? Or would over-confidence result in crazy losses?

I’d like you to stop for a second and google either ‘FTSE 100 Index’ or ‘S&P 500 Index’ which are indices of leading companies in the UK and US respectively. A market summary graph should pop up. Please select the ‘Max’ label to see how the index has changed since the 1990s. You’ll see that there have been a shedload of ups and downs, but that the general trajectory has been up. In theory, those with crystal balls or time machines or great powers of prediction could have made loads of money by knowing when to get in and out. But I hope it’s immediately obvious that for the average investor, it’s nigh on impossible to consistently get this right over a 20 year time horizon.

On the other hand, even those who invested at some of the previous highs haven’t exactly lost their money – so long as they’ve stayed in the market. In fact those who invested in the S&P 500 index at the height of the market, just before the crash of 2007/2008 will be laughing right now as they’ve gained more than 100% since then and that’s before factoring the AMAZING impact of having dividends re-invested and COMPOUNDING. Good diversification would have meant adequate exposure to the US stock market as well as other markets. Now, just because we have about 40 years of data showing a LONG TERM upward trajectory of the market doesn’t mean that this trend will definitely continue. But I remain optimistic.

Something I read here that was really surprising to me is that missing the 10 best days in the market from 1998 to 2017 would have cost the investor 166% in lost returns. WOW…….. It gets more dramatic: apparently these best days have tended to be just around the most difficult periods of the stock market when everyone was losing their heads. Hope the above discussion has convinced you, just as it has convinced me that for most average investors, it makes sense to NOT try to TIME the market, but rather to stay invested in a WELL DIVERSIFIED portfolio over the LONG TERM.

Yet, I am about to suggest what might seem to be a slight contradiction to everything written so far. Alternatively, you might think there’s no contradiction and that I’ve just framed things differently.

What’s the ONE Time I might succeed in Timing the Market?

Let’s start with a tale of the Scared Chicken…….. The year was 2007, I was 2 years into my career as a Pharmacist and had just added another investment property to my tiny portfolio. Except, being the young and inexperienced investor I was, I’d overpaid for the property by a significant margin and was barely making any rental profits.

Then the CRASH happened !!!!!!!!!!

I hadn’t started investing in shares at this point, but on the property front, I knew exactly what the personal finance books said I should be doing. The books were screaming at me to get more active in the property market during a downturn. I remember the moment I made the unfortunate decision not to try to do anything further in property because I was TERRIFIED. I remember exactly where I was sitting: I can still picture it perfectly. Could I have continued investing in property? Yes – although it would have been difficult (not least due to mortgage lenders tightening their lending criteria). After all, I’d managed to find the £17,500 to pay for my MBA cash-down from my OWN resources.

And so it was that I missed the best time in the property market cycle to have bought a property. Years passed and I did nothing. 2008 came and went, as did 2009, 2010, 2011, 2012 and 2013. That’s over 5 years of doing NOTHING. My next property move was in 2014, which thankfully still caught some of the aggressive growth in London house prices. Later, I heard about the smart investors that ramped up their activity on the property front during those 5 years I was SCARED and dormant – they’ve done exceedingly well.

On the shares front, I only invested a very small amount during this period as I was still building my confidence in investing. By 2016, I was kicking myself for not taking advantage of the opportunities that were right in front of me. Before my very eyes, I saw the stock market rally like MAD. This MISSED opportunity taught me a lesson that no book could teach me and I promised myself that if anything like this ever happened again, I’d ACT more decisively. What was previously just head knowledge and subject to my emotional whims has now become a SIMPLE ACTION trigger:


I will STAY in the market at ALL times, HOWEVER, if a MAJOR event causes the market to fall dramatically, I will PILE in with every pound I can find, outside of my rainy day fund


I think this is a form of market timing, although you might argue that it isn’t. Keep in mind that this type of major market crash only happens once in a long while. Perhaps once every few decades. If interested in learning about what drives the cycle of boom and bust, I’d recommend that you watch this (How the Economic Machine Works) video by Ray Dalio, a billionaire hedge fund manager

I’ll now illustrate with a real life example of what happened during the Covid-19 pandemic. But first, I need to explain that I’m not oblivious to the fact that Covid-19 has wreaked havoc in people’s lives: loved ones lost, jobs lost, industries decimated I am saddened by what I’ve seen and heard.

Towards the end of February 2020, I noticed that the market had started reacting to the newly discovered coronavirus strain. All those years of scolding myself for being a CHICKEN during the last market crisis meant that I was poised to act immediately.

I could have tried to wait for the market to get to it’s lowest point before investing, but I wasn’t sure if the market would keep falling – it could go back up at any minute. So I decided to drip feed whatever money I could find into the stock market roughly twice a week. These were all passive index trackers with no transaction costs for dripping money in. I told all my friends and colleagues what I was doing and even changed my whatsapp profile picture to ‘Sale Now On’ to trigger a conversation that might lead to action. My dad called and asked what I was selling… ha ha ha

Soon I ran out of money to invest and the market kept falling until it seemed to reach it’s lowest point in late March. Note that at the time, I didn’t know how much further it would fall, nor did I care. All I wanted to do was just keep putting money into the market. It was like walking into Tesco and seeing a 15% sale on Jack Daniels one day and then returning to the store to see Jack Daniels on sale for 30%. Well, it has a long expiry and I drink it and entertain guests with it, so of course I’ll buy more.

Something else happened: I wasn’t travelling into work anymore, I wasn’t going out, wasn’t eating out and so I was building up savings faster than usual. So guess what I did? Yep I bought more Jack Daniels and now at an even bigger discount. I thought that the market might possibly stay down for a year or more, but it started coming back fairly quickly by June 2020. As at February 2021, some indices like the S&P 500 have now recovered fully and surpassed the previous high.

Consider A Core and Satellite Approach if Prone to Chasing Shiny Things

So far, I’ve been discussing what I did with over 95% of my shares portfolio. Being the greedy bugger I am, I also allocate less than 5% of my portfolio to playing around with individual stocks.

Here are some of the ‘discussions’ I had between March 2020 and December 2020: “Look at that ‘shiny’ Tesla stock – it’s up 85% and there’s rumour of a stock split around the corner. Look at those other ‘shiny’ stocks: my crystall ball (aka analysis) tells me workhorse will win the US Postal Service contract (crystall ball was wrong…lol); how about Nio, Cineworld, Blink, Plug Power, Boohoo, Nikola, Zoom”

Many of these individual stocks have had a crazy ride since March 2020 and therefore those timing the market in the sense that they invested when the market was down, would likely have made some money. If like me, you can’t resist chasing shiny individual stocks, you might want to consider a core and satellite approach, whereby the core of your portfolio is in low-cost passive index trackers. You can even choose Baskets that expose you to groups of these shiny stocks. Then allocate a smaller percentage of the portfolio (the satellite) to individual stocks.

Now, I want to be real with you and acknowledge that the odd down-right crazy risk taker may have succeded in piling into one or two of these shiny stocks with their entire portfolio and made it out with ridiculous amounts of money. But let’s be clear that this is a very risky strategy as one could literally LOOSE IT ALL. If it can rise by 300% in a month, it probably means it can also fall by 300% in a month.

Nio, an electric vehicle maker for instance was valued at 2.40 US dollars per share on 20th March 2020 and rose to 54 US dollars per share on 27th November 2020. Somebody, putting their life savings of $50,000 into the stock on 20th March would have acquired 20,833 shares. Those same 20,833 shares would be worth $1.1 million on 27th November 2020. Try convincing that person or their associates that it was a risky move and that they should have done passive index trackers and they’ll probably laugh in your face.

Let’s not get carried away though. The example above is great on paper, but the practical reality is very different. For starters, few would have been able to resist the urge to cash out sooner, once they’d doubled or tripled their life savings, particularly when faced with an uncertain future. Afterall, it was not that long ago (late 2019) that Nio was facing the very real prospect of going bust.

Using the above example and assuming a core and satellite approach of 90% and 10% was employed: let’s say $45,000 (90%) was invested in a FTSE 100 index tracker and $5,000 (10%) was invested in Nio between March and November. The FTSE 100 went up about 30% in that time and so the $45,000 will be worth $58,500. The $5,000 in Nio would be worth $112,500 and I reckon that it would have been easier to leave $5,000 invested for the entire period than the $50,000 life savings. Total would be $58,500+$112,500 = $171,000. So, let me ask you a question and please try to be honest with yourself. Which of these two options would you go for?

  • Toss a coin and HEADs you loose your entire $50,000 life savings or TAILs you walk away with $1.1 million

  • Toss a coin and HEADs you loose $5,000 (i.e still keep $45,000) or TAILs you walk away with $171,000

That’s interesting Bemi, but I don’t do Shares

Are you sure about that? Let’s now go back to what I wrote at the beginning. Your work place pension is most likely invested in the stock market if you are not in an NHS type pension or defined benefit pension. Depending on your stage in life, you might be interested to know that this would have been the perfect time to trigger Pension Salary Sacrifice and/or Pension Carry Forward (if a very, very high earner). Note that it is still worth looking into this before the end of the Tax year.

Let me explain, starting with Pension Salary Sacrifice. But first, please, please remember to seek advice from a professional (your HR department at work should be able to point you in the right direction) as this is only a general discussion. Pension salary sacrifice allows you to make pension contributions in a tax-efficient way. See here for details. The point is that if you are one of the lucky ones to have held onto a job during the Covid pandemic and if you have amassed more savings than usual, you could consider sacrificing some of your salary into your pension. In addition to the tax benefits of salary sacrifice, depending on the funds in your pension potfolio, you could be triggering salary sacrifice at a time when the market hasn’t fully recovered.

Back in April 2020, I went quite heavy on my pension contributions because it was clear to me that there was a worldwide SALE on shares.

This was also the period for the very, very high earners to consider triggering Pension Carry Forward (see explanation here) , which basically allows you to use unused annual allowances from the last 3 years. I’ll end with a fictional example.

Adejumoke is a management consultant and earns £48,000 a year in base salary. It’s March 2020 and she notices that the market has fallen dramatically. She remembers an interesting conversation with her sparring partner in Muay Thai class, suggesting that she seriously consider piling in to the market whenever there’s a MAJOR wordwide market crash. She informs her HR department that she’d like to salary sacrifice £10,000 into her pension so that her base salary is in effect now £38,000. This is fine for her as she has no immediate plans to buy a house and therefore doesn’t need to show a high salary for mortgage purposes.

Adejumoke has been working from home during most of 2020 and has saved quite a bit of money. It’s January 2021 and she’s pleasantly surprised to learn that she’ll be getting a BONUS of £5,000. She decides that she’ll contribute her bonus to her pension via salary sacrifice. Adejumoke is super happy because the £10,000 extra she paid into her pension back in March has already risen over 50%. She can’t wait to tell her Aunty Lolade about it.

Aunty Lolade is a Lead Actuary in an investment bank and earns £200,000 a year in base salary. She is really happy for her niece and has actually learned something new from the conversation. She speaks to her HR department and they put her in touch with an adviser who suggests that she trigger ‘Pension Carry Forward’ The maximum she can contribute into her pension in the current year is £40,000 (actually less due to her employer’s matching contributions). However she has £10,000 unused allowances from the last 3 years. Therefore she can Carry Forward £30,000 from previous years plus her £40,000 from the current year = £70,000. She is so happy as she knows that this money is going into the market at a time when it is down. She feels like she’s ‘TIMED’ the market very well………..

Hope you’ve enjoyed reading as much as I’ve enjoyed writing this one


Bemi Odunlami


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