{"text":[[{"start":6.32,"text":"I mostly ignore rock star chief executives. But seeing Jensen Huang all over the news in the past few days is a useful reminder that no matter how bad you think your week has been, it could be worse."}],[{"start":18.11,"text":"Everything’s relative, isn’t it? Thus, I’m even trying to rise above the havoc he has wreaked on my portfolio. Volatility is the name of the game these days, anyhow. Markets have been up and down like mad kangaroos since the US midterms."}],[{"start":35.42,"text":"Stay calm, Stuart. I have again been pondering the topic of market timing. Last week, as global share prices plunged and bonds leapt, I was seconds away from torching my 19 per cent weighting in gilts and buying more stocks."}],[{"start":48.81,"text":"Life intervened and I didn’t press the button. Would it have been a good trade? Maybe, but it’s too early to tell. Theory, however, says I was stupid even to bother. Second-guessing short-run moves is impossible. It’s far better to keep calm and do nothing."}],[{"start":65.414,"text":"It’s time in the market, rather than market timing, that makes you money. This adage is hard to deny if you look at a long-run chart of most stock indices. Prices go from the bottom left to the top right with some wobbles along the way."}],[{"start":79.92,"text":"Trying to be cute in those wobbly bits is tempting. Why it ends up being catastrophic for your returns, however, is simple. Indeed, in my view, this may be the top investment lesson out there, and it comes down to psychology."}],[{"start":92.055,"text":"When prices are in freefall, trade data makes it clear that our tendency is to panic and sell. (We do the opposite when markets are booming.) The worst case of this that I saw in my career was during the financial crisis — with maximum outflows occurring just before equities reached their nadir."}],[{"start":108.511,"text":"But the brief sell-offs — such as we’ve seen recently — can also spank your performance. That is because the subsequent rebound days contribute a huge amount to long-run returns. And the problem is that these tend to happen quite soon after the initial drop."}],[{"start":122.982,"text":"In other words, they happen just after you have sold everything, so you won’t change your mind that quickly. Or maybe it’s embarrassing to call your broker again. Investors are also in maximum pain immediately after losing a large sum. Fear doesn’t turn to greed overnight."}],[{"start":137.92,"text":"Hence, those rebound days come and go when you’re out of the market. Take the S&P 500 over the past three decades. If you’d missed the top 10 rebound days that occurred within five sessions of a fall of 2 per cent or more, your total return would be 61 per cent lower."}],[{"start":154.08,"text":"Had you skipped the top 20 rebound days (more of the smaller ones), you’d be lagging behind by more than 80 per cent. The results are broadly similar for the Nasdaq (65 and 85 per cent) and MSCI World (55 and 77 per cent)."}],[{"start":169.139,"text":"For the MSCI EM Asia index — which my fund tracks — the numbers are scary. Investors who were out of the market for the top 10 rebound days (again, closely following a big decline) would have kissed goodbye to three-quarters of their potential gains. Miss the top 20 and you’re suddenly up just 24 per cent versus a 165 per cent rise in the index."}],[{"start":191.803,"text":"That’s insane. But it certainly feels true enough at times — especially when markets are flip-flopping all over the place. Try finessing your exit or entry points in Latin America, say. Last month, my fund was up by 10 per cent only to lose the lot in a single session weeks later. In the past six days it’s risen 7 per cent again."}],[{"start":210.821,"text":"For most retail investors, I would advise that the lessons above are all you need to remember if you ever have the urge to time the market. I should probably stick to the golden rule of buying and holding too. Luck was on my side when I flipped my stocks this year. But I shouldn’t push it."}],[{"start":225.44,"text":"The reason I did, though, is because of something else you’ll notice if you gaze at enough super long-run charts. Although the trend is unequivocally northwards, there can be better and worse periods. The S&P 500, for example, went nowhere between 2000 and 2013."}],[{"start":241.17,"text":"Why does this happen? Valuations tend to deviate around a long-run mean (although they can stay elevated for ages, as we’re seeing in the US). That affords an opportunity. Time it right — especially if you’re moving funds between markets at different points in their cycles — and loads of relative gains and even absolute ones can be made."}],[{"start":260.389,"text":"Using the S&P 500 again, because it has the cleanest and longest data series, there is a meaningful (in statistics speak) negative correlation between its price-to-earnings ratio and subsequent 10-year and 20-year returns."}],[{"start":273.331,"text":"In other words, when the ratio is lower, there is more of a chance of higher returns over the next few decades and vice versa. It doesn’t always hold. And the correlation can break down for longer than you can stay solvent, to paraphrase US analyst A. Gary Shilling."}],[{"start":288.137,"text":"But over time it pays to reduce your weighting when valuations are up and raise it again when they are lower. It may sometimes seem in this column as if I’m putting my finger in the air, but for all of my funds I’m constantly watching their relative valuations as well as their valuations compared with their own histories."}],[{"start":304.72,"text":"It’s a bore, to be sure — though your favourite large language model can now do this sort of thing in a jiffy. Then again, if you cannot be bothered, that’s fine as well. Doing nothing is a perfectly legitimate investment strategy. It may even be the best one."}],[{"start":319.51,"text":"The author is a former portfolio manager. Email: stuart.kirk@ft.com"}],[{"start":null,"text":"Vanguard FTSE 100 ETF (GBP)"}],[{"start":null,"text":"iShares MSCI EM Asia ETF (USD)"}],[{"start":null,"text":"Vanguard FTSE Japan ETF (USD)"}],[{"start":null,"text":"Vanguard S&P 500 ETF (USD)"}],[{"start":null,"text":"BlackRock Latin American Ords"}],[{"start":null,"text":"4.5% Treasury Gilt 2034"}],[{"start":327.04,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794583468_3067.mp3"}