Consistency or Timing? A Curious Case of Nifty 50

Anvesh Pandey - Dec 20, 2022

Have you ever wondered what gives better returns using NIFY 50, Consistency or Timing? It's a question that has plagued investors and traders for years. Sure it's true that timing the market is part of the equation, however it is not the entire strategy. One of the most common mistakes people make when they buy stocks or mutual funds is, they do not follow a consistent set of rules that have proven results time after time.

It's difficult to identify exactly when the market is going to have a correction or a fall or is it just a correction or bear market? In addition to that the chance of losing money in the markets is higher if you try to time them. The human ego can make it difficult to accept that you can lose money in the market, but it happens all the time.

Let’s have a look at the data of Worst Timer & Perfect Timer who invested on monthly highs and monthly lows respectively for 10 years. Despite losing sleep and taking stress of timing the market, Perfect Timer made only 16,451 Rs more in 10 years. Why would you do that to yourself? Instead, live a tension free life by choosing disciplined regular investing with equity mutual fund SIPs.


Worst Timer

Perfect Timer

Invested 10,000 Rs./ Month     1,20,000 1,20,000
Current Value 2,23,862 2,40,313
CAGR 11.97% 13.30%

You can calculate SIP Returns here. Also, watch this video which will show you this calculation and power of compunding with real NIFTY data.

An analysis by Investocafe shows that for retail investors consistency outperform timing. While average future returns are higher for timing strategy, that does not mean that it is better for all time periods as in-sample returns for consistency strategy are also good; however, it does show that investors can tolerate some market risk to an extent. Timing strategy seems to benefit from being in cash more than consistency strategy; however, many investors like the idea of avoiding extreme downside risk, in which case a portfolio based on consistency strategy is suitable.

Consistent investing helps in averaging out and capturing the benefits of rupee cost averaging. It is important to understand that the market fluctuations are not an end in themselves. The purpose of investing is to achieve a better return than what you could get from saving or other alternatives. The most important thing is to have a long-term view of your investments.

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Having a consistent investment strategy is a better way to achieve your long term financial goals than trying to time the market. They say timing is everything. But when it comes to NIFY 50, Consistency trumps it all.


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