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Timing the markets versus time in the market

Timing the markets versus time in the market
Kenny Meiring
By Kenny Meiring
27 Mar 2025
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Your investment strategy must be able to handle the many political and economic challenges that you will encounter over both the short and long term.

Question: I’m worried about what is happening. There have been reports of the stock market falling and the Government of National Unity being in trouble. Should I cash in my investments and keep the money in the bank until things settle down?

Answer: What you are proposing is quite a radical move and should not be taken lightly. There are a couple of factors that you should consider carefully.

Timeframe


What is the timeframe of your investment? Is it for the long term, the medium term or the short term? 

If you are investing for the long or medium term, you should not be concerning yourself too much about short-term movements in the market. We will always have these, but over a couple of years the impact will dissipate so that you won’t notice it.

Remember, markets are volatile over the short term but stable over the long term.

If you are investing for the short term, then you should not have too much exposure to equities in any case. These investments should be in cautious instruments such as bank deposits, money markets and bonds.

Recency bias


Recent events tend to colour our judgement. We expect the future to be like the present while ignoring the longer-term trends.

If you are a long-term investor, one of the questions you would need to look at would be whether the fundamentals of the market have changed over the past two weeks. 

A month ago, analysts said the American market looks as though it is overvalued, and the South African market looks as though it is undervalued. Now, when you take away all the noise of Donald Trump’s tariff wars and the South African Budget, has any new evidence come to the fore that would change those evaluations of the market?

If those evaluations still hold, then you should just ride out the current volatility. If you do see a difference, then you should act.

Locking in profits or losses


If you take your money out of the market, at what stage would you go back into the market? Trying to time the market is difficult. 

When the markets fell during the Covid-19 pandemic, a number of people withdrew their funds with the view to putting them back when things stabilised. What happened was the market bounced back very quickly and they ended up locking in the initial losses.

To give you an indication of the implications of not being in the market on the best days, look at this example. 

Let's say that you invested R1-million on 1 January 2014 and withdrew it on 31 December 2024. You  invested in a fund that tracked the JSE All-Share Index.

If you took your money out of the investment for the best-performing five days over that period, your returns would have been R305,000 less. If you missed the best 30 days it would have been almost R1-million less, as can be seen in the table below.



Now, just to give some perspective, I repeated the exercise above but looked at being out of the market on the worst-performing days.



As you can see, being out of the market on the worst days can really add substantially to your investment.

The challenge is being able to identify the best and the worst days before they happen. If you cannot do that, then you should rather remain invested. There’s a lot of wisdom in the saying, “Time in the market is better than trying to time the market”.

It is important that you have an investment strategy in place that can handle the many political and economic challenges that you will encounter over both the short and long term.

A disciplined, long-term approach to your investments can help you make wise decisions over the shorter term. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to [email protected].

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.



 

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