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New analysis from the international investment bank reinforces what all of us have long suspected: investors can never attempt to time the market.
When it comes to investing in the financial markets, panic selling sometimes leads to lost opportunities – and waiting for the dip can rob you of the most profitable days to own a specific asset. These are the main findings of a thorough analysis of the S&P 500 Index undertaken by Bank of America.
Bank of America strategists discovered that a simple hold policy produced cumulative returns of 17,715 percent using data dating back to 1930. Investors who attempted to time the market, on the other hand, avoided losing out on the best trading days. Missing only ten of the S&P 500’s best trading days per decade would have limited overall returns to just 28%.
Following a big decline, many buyers, mostly novice ones, have a natural desire to sell. However, Bank of America discovered that the market’s best days often accompany the worst fall. Panic selling on the way down can cause investors to lose out on the better days.
Savita Subramanian, the bank’s head of U.S. equity and quantitative strategy, explained:
“Remaining invested during turbulent times can help recover losses following bear markets – it takes about 1,100 trading days on average to recover losses after a bear market.”
Cryptocurrency investors, especially Bitcoin (BTC) holders, have a low time preference. About 60% of Bitcoin’s circulating stock hasn’t changed in a year or more, according to industry data, suggesting increasing trust in the digital commodity. Also after the most recent market increase, only 36% of Bitcoin’s circulating stock has changed hands in the last six months.
Seasoned crypto investors, known as HODLers after a meme that started on the bitcointalk forum in 2013 when a user misspelt the word “hold” in reference to BTC, have discovered that timing the market will cost them dearly in the long run.
Bitcoin’s ten best trading days a day, including bonds, account for a sizable portion of its profits. During the 2017 bull market, the Bitcoin price increased by 1,136 percent in the best ten days of the year.
Any entrepreneurs have attempted to use artificial intelligence and machine learning technologies to assist traders in controlling their emotions. Stock Cards, a browser extension designed to help investors forecast and avoid FOMO and fear, is one example.
Long-term Bitcoin holders are reaping the profits of their HODL plan, with the 2021 boom allegedly producing thousands of BTC millionaires.