In short:
- Timing the perfect market entry point is practically impossible.
- A realistic strategy is to put your money to work as quickly as possible and keep it invested for the long term, or to use the average cost effect to reduce risk.
- Our analysis shows: being invested is more important than timing the market. Since the return differences between a random and the “perfect” entry point are surprisingly small, entering the market as early as possible is crucial.
To find this out, we had 4 hypothetical investors invest in the MSCI World over a 10-year period (2015–2024) and compared them with 2 savers (cash and bank account). All 6 individuals received CHF 1’200 at the end of each year and either invested the amount in the MSCI World or saved it in a bank account/piggy bank.
These are our individuals:
- Gustav Luck: Invests the entire amount each year at the lowest point with perfect timing.
- Anna Start: Invests CHF 1’200 on the first trading day of each year.
- Daniel Average: Invests CHF 100 monthly on the first trading day of each month.
- Ursi Unlucky: Invests annually at the worst possible time (yearly high).
- Boris Cash: Stashes the CHF 100 notes in his mattress.
- Karl Account: Keeps his money in a bank account.
Notes:
- To calculate the annual interest for Karl Account, we use historical time series of the average interest rate on a Swiss savings account (source: SNB).
- Fees, taxes, and inflation were not considered in this calculation.
The following graph shows how much wealth each investor or saver accumulated over these 10 years (2015–2024).
As expected, Gustav Luck takes first place with his perfect sense for the yearly low, ending up with CHF 23’459.41 after 10 years. What is very surprising, however, is the result of Anna Start, who simply invested all her money on the first trading day of each year without giving any thought to timing. She accumulated only about CHF 2’200 less wealth than Gustav Luck.
Daniel Average, who benefits from the cost averaging effect, also performs quite well and earns a return of over CHF 8’000 on his invested CHF 12’000.
The result for Ursi is truly surprising: she achieved a considerable return of over CHF 6’000, even though she consistently invested at the worst possible time (the yearly high).
It is striking that Karl Account only has CHF 12’153.59 after 10 years, which doesn’t even come close to the returns of the investors (even Ursi!).
However, the undisputed loser in our comparison is Boris. Whether the CHF 100 notes in his mattress improved his sleep, we unfortunately cannot say—but one thing is certain: after 10 years, he does not have a single cent more than what he actually saved. While his CHF 12’000 is still CHF 12’000, due to inflation it is unfortunately no longer worth as much as when he set it aside.
We conducted this calculation with our 4 hypothetical investors and 2 savers for all rolling 10-year periods since 2001 (i.e. 2001 to 2010, 2002 to 2011, 2003 to 2012, etc.).
In our comparison, the result was largely the same for all rolling 10-year periods since 2001. Only in the periods starting in 2001 and 2002 did Anna and Daniel switch places.
So when is the best time to invest?
If you want to invest a certain amount each year and are unsure when or how frequently to invest, it’s best to make a plan and follow it consistently. Whether it’s a one-time investment or smaller monthly contributions, what ultimately matters is that you stick to your plan and invest.
It is impossible to predict the development of the stock market. Since even hypothetical perfect timing is only slightly more advantageous than investing as early or as regularly as possible, for many investors—after weighing risk and expected return—it is best to invest the money as quickly and consistently as possible, regardless of the current price.
Disclaimer
There is no guarantee that you will make a profit by investing. Investing involves risks that you must be aware of. Past performance is not an indicator of future results. This article does not constitute investment advice. Although VIAC has carefully researched the content and information above, no guarantee can be given as to its accuracy or completeness. Any liability is excluded.