On the Dangers of Market Timing: An Example

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I have written many time before on the futility of market timing. Since markets tend to go to extreme levels on both the upside and downside trying to get in and out at tops and bottoms will lead to worse outcomes. The wise strategy is to simply stay in the market regardless of volatility and focus on the long term.

The following chart shows the dangers of market timing:

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Source: Principles of Investing, Morning Star

A $1 investment in stocks 1926 would have grown to $9,244 in 2019. But missing the best 51 weeks during the many decades between those years would have left with a growth of just $21.47 !.

The Top 10 Stocks in Emerging Markets 1990 to 2021

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One of the important points to remember about any major index is that the top stocks in the index change year over year. This is true for any market. In emerging markets it is even more relevant since leaders in emerging markets compete more aggressively and established players are more easily replaced by newer firms. With that said, the following table shows the top 10 stocks in the MSCI Emerging Markets Index from 1990 to 2021:

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Source:  Is India Assuming Leadership in Emerging Markets?, The Emerging Markets Investor

When the index was created in 1990, the top 10 in the index looked a lot different than what they are in September 2021. India did not have any company in the top 10 in 1990. But today it has 2 companies among the top 10.

Among the next top 10 at the end of 2020, China had half the stocks. Now it has only two. Firms from Russia and India have taken over the spots.

The key takeaway is that today’s winners could become tomorrow’s losers or at least average performers. Hence investors need to build a diversified portfolio accordingly.

Related ETFs:

  • iShares MSCI Emerging Markets ETF (EEM)
  • Vanguard MSCI Emerging Markets ETF (VWO)

Disclosure: No positions

 

The 2021 Andex Chart for Australian Investors

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The Andex Chart shows the performance of various asset classes for the Australian market over the long term. This powerful chart contains other fascinating details like annual returns,  political leadership, etc. A $100 (Australian $)  investment in 1950 would have grown to A$260,786 by 2021 or at about 11.7% per year. Some of the major global and Australian events are noted in the chart as well.

You can view the chart at Andex Charts Pty Ltd 

Related:

Related Andex Charts for  other markets:

Fact of the Day: New Car Price in the U.S. vs. India

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The average price of a new car in the U.S. has been increasing consistently for many years. Like the humble bicycle cars used to be a form of transportation to travel from point A to point B. That is no longer the case. Today’s automobiles have some of the top high-tech features possible like an internet connection, infotainment system, side-view cameras, rear cameras, air-bags, multiple sensors, a computer, etc. As demand for these gadgets increased automakers have been more than willing to include them or even make them standard in most cars and accordingly raise the price of the vehicles.

According to J.D. Power the average price of a new car reached as astonishing $41,044 in July this year, an all-time high. New car prices soared last year and this year due to unique circumstances like high demand and a limited supply. Chip shortage and supply chain issues led to a huge shortage of new autos.

But even in December 2019, the average price of a new car was $38,948 per Kelly Blue Book.

Compared to the prices in the U.S., 95% of the cars sold in India are priced below $20,000 according to an article at Reuters. Sure India is a poor country while the US is a rich country. But still that does not mean an average car need to cost Americans over $41K.

Source: Ford wakes up badly burnt from its India dream, Reuters