Market timing calculator
Everyone would like to buy at the bottom. This calculator shows what that would actually have been worth, using US share market history going back to 1871.
Pick any period, invest regularly or as a one-off lump sum, and compare a perfect market timer, the worst possible timer, and the approaches real investors follow:
Investing every month
Waiting for a dip
Getting out until the crash is over, and
Avoiding (or only buying at) all-time highs.
You can see the results in US or NZ dollars, before or after inflation.
What the history shows
Perfect timing does pay, but by far less than most people expect. Over long periods, someone who somehow bought at the cheapest point of every year ends up only a few percent a year ahead of someone who bought at the most expensive point. And that perfect investor doesn’t exist.
The approaches real people use are what matter. Waiting in the bank for a dip has rarely beaten simply investing every month, because markets spend far more time rising than falling, and the money sitting in the bank misses that growth. Getting out during a crash and waiting for a recovery usually costs a little, because the rebound often comes before it feels safe to get back in.
Is buying at an all-time high a mistake?
It feels risky, but history says no. The market hits new highs often, because over time it tends to rise. In the calculator, investors who only bought at all-time highs did only slightly worse than those who invested every month. Those who refused to buy at highs gained nothing for their caution.
Shorter periods are a different story
Try the 5 year and 10 year buttons. Over shorter periods the gap between good and bad timing is much wider, and what the market itself does matters more than timing. That’s why money you need in the next few years generally doesn’t belong in shares at all, whenever you buy.
What this calculator doesn’t include
It uses the US share market (S&P 500), the longest reliable history available. Other markets, including New Zealand’s, have had different paths.
Prices are monthly averages, so the very best and worst days don’t show, and sharp short falls look smaller than they felt.
There are no fees or tax, and NZ dollar results assume the currency isn’t hedged.
The waiting approaches act the month their trigger is reached. Real people usually take longer.
It’s general information about what has happened, not a prediction or personal advice.
Related
Shiller P/E calculator: how expensive is the market today, and what has that meant for later returns?
Wondering whether now is the time to invest a lump sum, or how much risk suits you? I’m a fee-only adviser. I don’t sell investments or earn commission, so the advice is about what’s right for you. Get in touch