Well I know nothing about shares, apart from the fact that my
free AMP and NRMA shares seem to be dying a slow death,
but I did find this article from the MoneyIQ Newsletter that I
receive quite interesting.
http://www.moneyiq.com.au/
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POOR MARKET TIMING CAN REDUCE RETURNS
Table 1 shows how $100,000 would have increased in value over a 20-year period if you had invested each year in the best performing asset class of the previous 12 months.
That is, if you invested $100,000 in December 1981 in the best performing asset class of the previous 12 months (Australian listed property). At the end of 1982, you withdraw your money (it's now worth $105,172) from listed property and reinvest in the best asset class of 1982, which was international shares, and so on.
Using this strategy, after 20 years, your $100,000 investment would be worth $1,083,417.
In contrast, Table 2 shows the result of investing $100,000 each year in the previous year's worst performing asset class. Using this strategy, your initial $100,000 investment would be worth $2,796,048.
This highlights the greatest risk in attempting to time markets. It's not the risk of investing in a declining market, but the risk of being out of the market at the trough of a decline when sentiment is at its most negative and potential future returns are at their greatest.
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[ EDIT: moved image to photo gallery and replaced with image link - Sim' ]