Why timing the markets can be risky for investors

If you have ever travelled on a Mumbai local train, you would know the difference between boarding at 7.45 am and 8 am on a weekday. The benchmark Nifty 50 index was down more than 20% from its all-time high, and it may Graphic: Santosh Sharma/Mint A study by Kuvera, an online mutual funds investment platform, on the historical returns from Nifty 50 between 1990 and 2019 reveals some intriguing statistics about what bottom fishing can lead to. Investing in the market after a correction in the range of 15-20%, has historically given a positive compounded annual growth rate of 13.4% over the next one year of investing. Your probability of beating the risk free rate actually decreased from 72% to 64%, probably because a correction of this magnitude was more long lasting than a shallower 15-20% drop. “Of course, the worse the market correction, the better the future returns look, but that does not mean you should wait for them.