CL Treurnicht – Portfolio Manager

Megan Fraser – BD & Marketing

July 2023

Common rhetoric of those investing in stock markets is that what matters most is time in the market rather than timing the market.  The most commonly touted perspective currently is: How much do investors stand to lose by not being invested in the market on the days that delivered the highest positive returns? This serves to incite FOMO in investors thus encouraging them to hang in there and remain invested. It would, however, be useful to interrogate this statement from another perspective. These are the top ten high and low days over the last 28 years:

The All Share Index (J203T) returned 13.61% per annum from the 30th of June 1995 to the 30th of June 2023. To put this into perspective, if you had invested R100 on the 30th of June 1995 this would have grown to R3,582.

Missing the top ten days would have reduced your annualised return to 11.1%. That means that your R100 would have grown to R1,911. Missing the top ten days would have cost you R1,671 (R3,582 minus R1,911).

There is a flip side to this: suppose you were able to miss the bottom ten days. Your R100 would have accumulated to an impressive R8,148; you would have earned 17.01% per annum. That is an additional 3.38% per annum (or R4,566 more) had you successfully avoided those days. Your investment is now worth 127.46% more than being invested in the index. Yes, it is more than double – compounding contributes to this.

Adding a dose of reality: looking at the best top/bottom days it is quite apparent that they are very close to each other. It is therefore probable that if you miss one, you’ll miss both…but that doesn’t mean investors can’t still score. As the table below illustrates, there is still tremendous advantage to protecting your capital from volatility.

You’ll notice the degree to which avoiding the bottom ten days surpasses those of missing the top ten.

Why does this have such a major impact?

Let us suppose you had R100 invested on a day where the market declined by 50%. To get back to R100, the market will need recover by 100% to get back to R100, where you started. Missing the top 10 days would be disappointing but the impact of missing the bottom ten days is game-changing.

Ah! yes, you say…but then you’d need to time the market and everyone knows that can’t be done. Spoiler alert! It not only can be done…it has been done quite effectively for the last 10 years by Gryphon’s multi asset funds.

These funds focus on preservation of capital, using data-based indicators to exit equity markets and ride out the volatility in alternate asset classes.  As you’ll see from the graph, this has certainly proven to be a viable philosophy over a period of time.

Investors looking beyond mainstream investment options will be delighted by the opportunities of affordable, transparent investment strategies that do not compromise performance returns.

“Responsible people don’t go around getting their nipples twisted!” ~Red Foreman, That 70’s Show