This article has been reproduced with the kind permission of Kernel Wealth. We thought it was a goodie for Cole Murray clients, particularly anyone with KiwiSaver or other Wealth Investments.
We get it – investing can feel scary. Many people tell us they’re worried about putting their money in just before the market crashes. It’s a completely natural fear, and honestly, you’re not alone in feeling this way.
Everyone seems to have an opinion about whether the market is “too hot” or “too cold”. We wanted to show you what would happen if you could actually time the market perfectly (spoiler alert: it’s impossible, but the results might surprise you).
Let’s look at an example
Say you made a New Year’s resolution back in 2000 to get serious about your future. You decided to save $100 every week.
You had two choices:
Option 1: Stick it in a savings account earning 2% per year (safe but low returns)
Option 2: Invest in a New Zealand stock market index fund (more risky but potentially higher returns)
By 30 June 2022, you would have saved $110,400 total. Not bad! But let’s see what happened to that money depending on your strategy.
Perfectly timing the market
Somehow you worked out how to invest at the exact bottom of every market crash. We’re talking about investing right after 9/11, during the Global Financial Crisis, and when COVID hit – basically catching every falling knife perfectly.
Your investment would be worth $333,605 today. Not bad.
But here’s the catch. You would need to know exactly when to invest on seven different days over 21 years. To do this you would need to predict the future. No big deal!
Absolutely botching timing the market
Now let’s flip it around. What if you had the worst luck and invested your savings at the very peak of every market bubble? We’re talking about investing right before every major crash, the tech bubble, the financial crisis, COVID, you get the idea …
Even with this terrible timing, your investment would still be worth $243,729. That’s still way more than the $138,048 you’d have from just keeping everything in that 2% savings account!
The “set and forget” approach
Here’s where it gets interesting. What if you didn’t worry about timing at all?
If you started investing $100 every week from day one, regardless of whether the market was up or down. You didn’t watch the news, didn’t try to predict crashes, and didn’t lose sleep over market headlines.
Your balance on 30 June 2022? $309,488.
That’s only 7.7% less than the impossible “perfect timing” scenario! Over 21 years, the difference between perfect timing and no timing at all is surprisingly small.
How does this work?
There’s an old saying in investing: “It’s time in the market, not timing the market that gives the best results.”
You buy more when stocks are cheap: When you invest the same amount regularly, you automatically buy more shares when prices are low and fewer when they’re high. It’s like getting a bulk discount without even trying.
Compound growth is powerful: The longer your money stays invested, the more time it has to grow. Those early investments have decades to compound, even if you bought them at a “bad” time.
Markets generally go up over time: Despite all the scary headlines, crashes, and corrections, the market has historically trended upward over long periods.
What you can actually control
Instead of worrying about things you can’t predict (like market crashes), focus on what you can control. Think about why are you investing? Is it for retirement, a house, or your kids’ education? Keep that goal in mind. When will you need this money? If it’s decades away, short-term market movements matter much less. How much can you consistently invest? It’s better to invest a smaller amount regularly than to wait for a large lump sum and the “perfect” moment. Are you diversified? Don’t put all your eggs in one basket. Spread your investments across different types of assets.
What have we learnt?
Trying to time the market perfectly is like trying to win the lottery, it might happen, but you shouldn’t bet your future on it. The good news? You don’t need perfect timing to build wealth.
The most important things are starting early, staying consistent, and not letting scary headlines derail your long-term plans. Your future self will thank you for investing regularly rather than waiting for the “perfect” moment that may never come.
WOULD YOU LIKE TO REVIEW YOUR INVESTMENT OR KIWISAVER STRATEGY?
Talk to a Cole Murray Wealth Adviser for a review of your KiwiSaver or for a broader investment strategy. We’ll help you set up an investment plan that works for you and your goals.
