“I can calculate the motion of heavenly bodies, but not the madness of people.”
These words were said by none other than Sir Isaac Newton after he lost a fortune in the stock market.
The story goes back to 1720. Ebullient after making a huge profit of £7000 by selling the shares of South Sea Company that he owned, Sir Isaac Newton decided to re-enter the market, when the market was closer to the peak. Thinking that the uptrend would continue, Newton kept holding the stock, only to sell it at a loss of £20,000. The brilliant scientist that he was, Newton got swept away by the frenzy of the market and lost a fortune in a stock bubble. The story goes on to prove that it is almost impossible to time the market and make gains consistently.
Three centuries later, the above statement still holds good.
The question that arises is how to be a smart investor. Here’s a simple rule of thumb that can help you to invest wisely:
Resist the impulse to Time the Market
Most of us are tempted to time the market in order to make big gains. While trying to time the market, we often tend to be overconfident of our judgement and overlook the fact that the chances of losing our money also increases as we time the market.
Some of the most successful investors agree that when it comes to investing, discipline beats intelligence. Studies have shown that a regular investor makes more money than one who times the market.