What if you were the unluckiest investor in India?


No one wants to be that “dumb” investor to invest right at the top, see a substantial decline, and then be told: “Of course, the market was set for a crash. Didn’t you see all the signs?” So, we wait some more. The solution is not having the perfect foresight about what will happen because that is impossible.

Instead, let’s do a thought experiment involving three types of investors who invest a certain amount every year in equities. 

  • The lucky investor: Invests at the bottom of the market every year. 
  • The unlucky investor: Invests at the top of the market every year. 
  • The regular investor: Invests on the first day of each year. 

As an example, let’s see where the three investors would invest in 2008. The regular investor would have deployed their money in the Nifty at 6,144; the unlucky investor would have deployed on 8 January with the Nifty at 6,287, and the lucky investor would have waited until 27 October to buy when the Nifty was at 2,524. 

Now, let’s look at the returns of the three investors at the end of the year in the sequence of lowest to highest returns: -52.9%, -51.8% and 17.2% for the unlucky, regular and lucky investors, respectively. 

Each of us worries about being that 2008 investor who invested in January to see that gut-wrenching decline. 

In our hypothetical exercise, the unlucky investor takes that fear to its extreme by investing at the market top every year. How disastrously does this investor do? 

Remember, like in 2008, our three investors invested a set amount each year from 2000 to 2023. Our analysis shows in some years, the regular investor and unlucky or lucky investor symbols overlap when the market opens at the high or low for the year, but that’s rare. 

Let’s pause to think how unlucky or bad an investor would have to be to unerringly invest at the top of the market every year for over two decades. 

24 years of investing: The long-term results 

The chart shows their portfolio values since 2000. Let’s assume all three invested 24 lakh cumulatively over 24 years.  

The lucky investor’s portfolio expectedly would have done the best. By the end of 2023, it would have been worth 1.92 crore with an internal rate of return (IRR) of 14.8%. The regular investor would not have done too badly, ending with 1.54 crore at an IRR of 13%. 

But note how the unlucky investor would have done. His portfolio would have been worth 1.24 crore with a 12% IRR. Yes, that’s a significant 35% lower than the lucky investor’s 1.92 crore portfolio. But even after choosing the worst possible days to invest in the market consistently over 24 years, it would have resulted in a return that comfortably beat inflation and fixed deposits. 

Rolling returns: A decade-by-decade analysis 

We also compared returns for the three investors over 10-year rolling periods, i.e., starting a systematic investment plan (SIP) each year from 2000 to 2010, 2001 to 2011, and so on until the last 10-year period of 2013-2023. The chart shows the annualized returns for the three investors for each 10-year period. 

The best 10-year period for all investors in nominal terms was 2000 to 2010. The worst period was from 2006 to 2016, when investors bore the brunt of the financial crisis and the long economic recovery that followed. Since then, returns have steadily improved, especially for the regular and the unlucky investor, implying a reduced benefit to getting your timing exactly right. 

Given how scary we find the prospect of investing at the “wrong” time, you would imagine the cumulative impact on long-term returns would be catastrophic. It turns out it’s only marginally worse than finding the market bottom each year. And since consistently finding the bottom every year is impossible, so is finding the absolute top. 

Time in the market beats timing the market 

The data demonstrates that for long-term investors who consistently invest in the markets, the timing of their investments is far less critical than we often fear. Even the unlucky investor still achieved respectable returns over time. 

This analytical exercise powerfully reminds us that the most important factor in long-term investing success is not perfect timing but the commitment to invest regularly. While we can’t control market fluctuations or predict future events, we can control our behaviour and stick to a consistent investment plan. 

So, the next time you find yourself hesitating to invest due to market uncertainty or fear of buying at the “wrong” time, remember this: The worst investor in our scenario still outperformed inflation and fixed deposits over the long run. 

The key is to start investing, stay invested and let time and the power of compounding work in your favour. 

In the end, the unluckiest investor isn’t the one who occasionally buys at market peaks but rather the one who never invests at all, missing out on the long-term growth potential of the markets. Don’t let the fear of being “unlucky” prevent you from participating in the wealth-building potential of long-term, disciplined investing. 

Anoop Vijaykumar is investments and head of research at Capitalmind.



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