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ResearchThe Weekly (1/26)

The Weekly (1/26)

Jan 26, 2024

As we turned the page on 2023, we’ve been combing through annual reports from countless institutions to get a pulse on where we’ve been and where we might be going (one our personal favorites is JP Morgan’s Guide to Markets).

The reports are littered with graphs and visuals to present a mosaic of what investors believe to be true.

Sometimes, a picture is worth a thousand words so we thought it might be interesting this week to show, not tell. 

If we were to pick out a handful of charts, backed by empirical data, that the everyday investor should memorize, it would be some variation of the below.

For all the visual learners out there, we think you’ll love this.

1.) Markets bounce back

It may seem difficult in the moment but using history as a guide, market indexes generally bounce back so long as you give them enough time. Data since 1928 seems to corroborate that point of view. (Source)

2.) Even the best investors can’t time the market. 

Starting in 1965 if you invested at the peak of the market in each year, your annual return was 10.6%. If you timed the market perfectly, invested at the low point of each year, your return was 11.7%. The difference between great timing and lousy timing was only 1.1%. 

The takeaway? Even if your timing is absolutely perfect, the long-term delta in performance is relatively small. Time in the market. (Source)

3.) Time in the market is far more important than timing the market.

If the first chart didn’t convince you, this might. As you've likely seen over the last several months, there have been some vicious days where markets snap back, and studies show that missing a few of these up days can really impair long-term compounding. 

TLDR: Timing the market is always harder (virtually impossible) than focusing on time in the market (within your control).

4.) Investors can be their own worst enemy.

Why might the everyday investor underperform? It's usually their behavior. The above is an incredible visual of how behavior can impair long-term results.

5.) There will always be a smart-sounding reason to sell.

What made the list? A government shutdown, the bankruptcy of the auto industry, natural disasters, and the largest single-day index declines on record. All since 2008. There will always be a reason to sell but it's how you react that can meaningfully impact your ability to compound capital. 

As investors, we're inherently biased towards folks who take a long-term approach to capital allocation.

Pictures can say a thousand words and we hope these provided a bit of perspective on the psychology of long-term investor.

Have a great weekend,

- Your Titan team


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