The Value Of Timing
During the weekend I was watching Ted Talks – one of my favorite pastimes- and came across a talk that spoke about how timing was the most crucial element in the success of a new startup. Not the idea, not the genius behind it, not the funding but the Timing. I am always intrigued by parallels with the market and found this one with startups to be quite fascinating. The person giving this talk enumerated several examples of how brilliant, well funded ideas failed because they started at the wrong time while some chancy ideas clicked despite lack of several other factors because it was timed to perfection. Many times this timing is not intentional but just happens. People then just ascribe it to good luck.
But the thought then arises that can the timing be timed?? Now, that would be a new one isn’t it? But in the markets it isn’t so new at all. Any good book that you read on trading or investing will stress on waiting for the right kind of trade or investment to show up rather than you chasing it down. Such trades and investments always tend to work out better. Think it over. Check you last set of successful trades. I am sure you will find many where the trade came to you rather than you went in search of it.
So, in a sense, good investors and traders wait for the opportunities to arise rather than take every single good looking one that comes their way, hoping for the best and taking a swing at it. This way there will be many failures and only a few hits. Its about the same in start ups too. There are many geniuses around in the world. There are many money bags too in the world and one is waiting to meet the other so that, together, they can build something that will make them both richer. But if either or anyone of them is in a hurry then chances are that they will get the timing part wrong as, in the hurry to get then product into the open will fuel wrong decisions and lead, ultimately, to failure due to lack of understanding of the value of timing.
An example of this was in the portfolio construction that I design for clients and help them manage. Investments created in 2014 worked wonderfully, giving returns of nearly 90%. The same approach used a year later, when the market was actually even more bullish and clearer about the trends, did not work at all and the returns over a year have been close to 0%!! Coming to smaller time frames, a portfolio designed in Nov 2015 and one in Feb 2016 have had dramatically different outcomes. The first one is still struggling to get into the black after ten months while the second one is in profits by over 25% in seven months! Mind you, the kind of stocks chosen are very similar and the approach used is the same in both the portfolios designed!
The person behind the design is the same (me) while the amounts invested too is the same. What is different between the outcomes is the value of timing. One of my favorite quotes during my training programs is “There are never any bad stocks. There are only bad times”. When the timing is right, even poor stocks will tend to perform and bring home the profits. But when the timing is off, it takes a lot of effort and time for even then good stocks to come thru. this highlights the value of timing more than anything else.
Many traders know the difference between the outcomes when their timing is off. That is why they seek out technical analysis as a means to solve their timing issues. However, if one doesn’t understand the importance of timing as an important element that governs everything that we do, even knowing TA wont help much. One of the ways that this problem is solved is by taking the urgency of time out of the equation. This is done by extending time to a level where it does not appear to be a factor.
Simply extend the time element to such a dimension (5 years, 10 years etc) that all the noises in between (which is really the cause of the failures) get ironed out. This is many times the value investor approach. Others call it conviction of the idea. Some one else says it is allowing something to grow. Call it what you want. Ultimately, you are talking about time and timing. So anyone who says that don’t try to time the market is actually saying, “Time it longer”!!!.
Life as we know is only about Time. There is nothing else. Everything exists in the context of the time interval between two events.
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