Imagine a hunter-gatherer ancestor returning home with a rabbit slung over his shoulder. On the way, he spots a deer. If he carries the rabbit home, his family will eat tonight. If he chases the deer, he may return with meat for several days, or empty-handed, having lost the rabbit as well. Natural selection favoured those who balanced two instincts: protect what you already have, and take a chance to improve your future. Financial markets awaken the same instincts.
Markets usually call those instincts fear and greed. Fear protects what we already have. Greed, unfairly named, is the desire to improve one’s future. Years of accumulated capital become today’s rabbit. A rising market offers the deer. Investors naturally want both. Since markets do not allow certainty and upside together, they look for a third magical option: market timing. Stay invested while the market rises, sell at the highs, and buy back after the market has reached the bottom. The rabbit remains safe. The deer is captured. Problem solved. Except it isn’t.
Market timing demands the opposite of human behaviour. Near a market peak, nobody rings a bell. Everything looks reassuring. Near a bottom, every headline looks frightening and every decline seems to predict another. It asks investors to sell when every instinct says stay, and buy when every instinct screams run. That is why the promise is seductive, but the execution rare.
Even if an investor could act against those instincts, that would solve only the behavioural problem. The timer must still know which high matters. Since January 2000, the market has reached an all-time high 492 times. Only seven of those highs were followed by a decline of more than 20%. So let us give the timer an absurd advantage: he can identify one of those rare highs, exit exactly there, and buy back after a 20% fall.
Take Covid 2020. An investor would first have had to divine that the January 2020 all-time high was one of those rare highs that would be followed by a major fall. He would then have had to sell at that high and buy back after the market crossed the 20% fall mark on March 12. That was the day trading was halted after the market fell more than 10% at opening. He would also have needed the nerve to sit through Manic Monday on March 23, when the market crashed again and touched its Covid low. After all that, ₹1 lakh would have grown to about ₹2.56 lakh by May 2026. The stay invested investor would have reached about ₹2.05 lakh. The timer did better, but not transformatively better.
Real investors are not supernatural timers. In Covid 2020, they were more likely to have held on at the January high, when everything still looked reassuring, and sold around March 12, the very day the imaginary perfect timer was supposed to buy back. The March 23 crash may even have felt like vindication. But by November 9, 2020, the market had already touched a new all-time high. Fear gave way to regret, and regret to fear of missing out. The re-entry happened later, higher, and with far more emotional damage than the original fall would have caused. The real-world investor probably did much worse than the investor who simply stayed put.
Market timing therefore fails twice: for the super timer, it adds less than expected; for real investors, it can turn temporary volatility into permanent damage. Truth be told, market timing is a mirage. Nobody can repeatedly know when the market will fall, when the danger has passed, and when it is safe to return. Good financial planning does not try to time the market, nor does it rely on finding an adviser who can. It decides in advance which money must stay safe and which money can be left alone through the uncertainty. That is how both instincts are honoured: Enough rabbit in hand to sleep at night, and enough courage left to chase the deer.
The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor; X :@harshroongta
TRUTH BE TOLD Harsh Roongta
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
(A slightly different version of this column first appeared in the Business Standard on 06 July, 2026)