In the past month, the FTSE 100 is down by more than 6%. So if I were to follow Sir John Templeton’s advice that “The time of maximum pessimism is the best time to buy“, then now’s a great time for me to buy shares, right?
But wait — since the beginning of the week, the Footsie is now up by 2.8%! So has the time of “maximum pessimism” been and gone, and I’ve missed my buying opportunity?
Well, no. But you knew that from the headline I wrote, didn’t you?
A brief history of recent times
It’s clear to all that the stock market is turbulent right now, and realistically it has been pretty erratic for the past two years.
First Covid-19 (leading to falling markets), then progress on vaccines being developed (seeing an upswing in the FTSE 100’s chart).
Followed by new variants and further lockdowns placed on Brits (another trough) before the economy showed signs of recovery (leading to a peak not far off all-time highs).
And now Russian President Vladimir Putin’s invasion of Ukraine causing near-daily swings in global markets…
Stocks under the microscope
One of the last times in recent years we saw such choppiness was between June 2015 and February 2016, when the FTSE 100 lost 20% in value, dropping to 5,537 on 11th Feb ’16 from 6,953 on 1st Jun ’15.
So did anyone buying shares after February 2016 — arguably the end of “maximum pessimism” in that period of time — mistime the market? Let’s take a look at a handful of examples:
Beginning 11th March 2015 — this time seven years ago — Greggs shares rode the volatility and by April the following year were only up 1%. Fast forward to today, the share price has increased by almost 130%!
From brick-and-mortar to the internet, let’s look at Rightmove now. From today’s date in 2015, its share price bucked the trend showed by the FTSE 100 and was up around 40% by March 2016. But over the past seven years, the shares have more than doubled!
Never too late
So to recap:
- not buying shares in quality companies just because you think you’ve missed out on the bottom of the market is foolish;
- having a Foolish, buy-and-hold investing mindset can lead to huge gains over the long term.
Whenever I have money to spare — that I won’t need in the next five years — I will likely always put it to good work in the stock market. Not for me, the paltry interest rates on savings accounts.
And while I’m fully aware that investing in shares puts my capital at risk and I may get back less than I invested, I’m confident that spending time in the market is a far better strategy for me than trying to time the market.
After all, who’s got time for that? I’d rather buy shares in quality companies, no matter the state of the market.
