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New research from the multinational investment bank confirms what many of us knew all along: Investors should never try to time the market.
When it comes to investing in the financial markets, panic selling often leads to missed opportunities â and waiting for the dip could rob you of the most lucrative days to hold a particular asset. Those are the general takeaways of a comprehensive study of the S&P 500 Index conducted by Bank of America.Â
Using data going back to 1930, Bank of America strategists found that a basic hold strategy would have yielded total returns of 17,715%. If, on the other hand, investors tried to time the market, they could have missed out on the best trading days. Missing just ten of the S&P 500âs best trading days each decade would have diluted the total returns to just 28%.
For many investors, especially inexperienced ones, the natural impulse is to sell following a major downturn. But Bank of America found that the marketâs best days often follow from the worst drops. Panic selling on the way down could lead to investors missing the best days.
Trying to time the market has been a futile affair. Chart via CNBC
Savita Subramanian, the bankâs head of U.S. equity and quantitative strategy, explained:
âRemaining 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.â
Cryptocurrency investors, and especially Bitcoin (BTC) holders, are known for having a low time preference. Industry data routinely shows that over 60% of Bitcoinâs circulating supply hasnât moved in a year or more, which reflects growing conviction in the digital asset. Even during the latest price surge, only 36% of Bitcoinâs circulating supply has moved in the last six months.
Seasoned crypto holders â who are called HODLers for a meme that originated on the bitcointalk forum in 2013 when a user misspelled the word âholdâ in reference to BTC â have become attuned to the fact that timing the market can cost them dearly in the long run.
Like stocks, Bitcoinâs ten best trading days per day are responsible for a significant portion of its gains. During the 2017 bull market, the BTC Price rose an incredible 1,136% in the best ten days of the year.
Some entrepreneurs have tried to apply innovations in artificial intelligence and machine learning to help traders manage their emotions. One example is Stock Cards, a browser extension created to help investors predict and prevent FOMO and panic.
Bitcoinâs long-term investors are reaping the rewards of their HODL strategy, with the 2021 rally reportedly producing thousands of BTC millionaires.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.