Are profits in the market a matter of luck or timing?

Charles Schwab (SCHW), an investment company, studied the effects of timing your investments and how this may affect their success. They divided various types of investors into five “characters” with different names, and each one invested $2,000 each year over a twenty-year period:

Whose investments performed the best?

Peter Perfect who netted $87,004. His perfect timing meant that he never got it wrong. But who was next?

Interestingly, this was Ashley Action, who gained $81,650 after investing straight away, regardless of what was going on in the markets. Not far behind her was Matthew Monthly, whose dollar cost averaging brought him $79,510. Surprisingly, the biggest loser was not Rosie Rotten. Despite her poor understanding of market timing, she still managed to make $72,487. The one who made the least money was Larry Linger, who only made $51,291.

Don't try to be perfect

Although it would be wonderful to be Peter Perfect, and be able to time the market, Peter Perfect is an entirely fictional character. Real investors (and even complex computer algorithms) cannot always time the market perfectly.