everybody always tells you don't time the stock market but what happens if you actually
time the stock market has anybody ever done the calculations well we're going to take a
small moment in time and we're going to actually calculate what happens between the person that
only buys when the market is going up and the person that only buys when the market is going
down and we're gonna see what the difference is between somebody who lost maybe eight hundred
dollars and somebody who may have made over four hundred thousand dollars based on their
market timing that's funny you see these articles like this one behavioral finance expert says fomo
fear of missing out is what that means will really derail an investor and then we hop
over here where it says how fear destroys your wealth when the market is in turmoil
and that's the whole thing what we're gonna do we're gonna look at two different people and
if you're a fan of this channel you know i like to use excel documents to show the actual numbers
and that's exactly what we're going to do person number one let me introduce you to this person
their name is newbie mccut now why do we call them that well because they're a noob in the
stock market they just started out with investing and they basically know nothing about the stock
market and the reason their last name is mick cut is because anytime that the market goes down and
we're in the fear mode they're gonna cut their losses and sell their shares now for this example
and today we're just going to use something very easy to make the math make as much
sense as possible we're going to use the s p 500 etf spy let's hop over to the excel document and
let's have some fun now i've shared this on the channel before but we have the fear and greed
index and that basically lets you know the emotion of the stock market at any given time right now as
you can see we're in number 55 which is a neutral fear and greed index last week we were in greed
at 60 a month ago in neutral and a year ago in neutral but if you click on timeline right over
here check it out it gives you not a lot of data but about one year's worth of data as to how the
stock market has been going well i decided what i'm going to do both now and ongoing is tracking
the fear and greed index and we're going to play around with what would happen if you're one of
those people that only buys on the hype so when we're in greed or extreme greed you're going to
buy in because everybody's talking about the stock market but when we get into fear and extreme fear
you're either going to hold or you're going to sell because you're afraid that the world is
coming to an end so the very left-hand side of our excel document you can see we have the fear
and greed index i painstakingly went through this entire thing and i tracked what the fear
and greed index was on every single day between october 20th 2021 and present day right now as
of the recording of this video then we're going to look at every date if they're going to buy or sell
the current etf price of the spy s p 500 fund how many shares they totally own the cost and their
portfolio value we're going to see what happens if you time the market on october 20th we're in
greed territory so they're going to buy one full share every single day now i know that's not
practical people don't have 400 a day to put down into the s p 500 font but just to make the mask
make a little bit more sense and make it a little bit more round that's why i'm doing this you can
always divide this and say it's four dollars and 51 cents if you want to but in any case
i'll make this make a little bit more sense with more practical numbers a little bit later in the
video but here we go we're going to buy a share we're still in greed we're still in greed in fact
we're in this fear and greed index all the way down here november 9th we're now in extreme greed
everybody's loving it the stock market's amazing look at the share price of spy 469 dollars per
share compare that to back here when it was at 4 43 or even back in january 1st of 2021 at only 381
dollars a share so here we are in extreme greed at greed greed and this person is just buying up the
shares but then on november 26th the day after thanksgiving maybe people had a little bit too
much turkey but they're in fearful territory now things aren't looking as good as they once did so
they're gonna stop buying that's all they're just gonna stop buying now right now as of this time
because they've been buying up they now have 26 shares and that 26 shares is worth a total of 12
117 now you can see it is starting to drop down a little bit to 12 000.020 and all of a sudden
they're like oh god my portfolio is dropping because the price of spy is going down so
therefore my portfolio drops and then it goes up a little bit to 12065 and then oh my god it's down
to twelve thousand and twelve dollars and then we get into extreme fear right here on december third
and they're like i can't take it anymore my portfolio balance has dropped significantly
to look at this eleven thousand seven hundred and eighteen dollars and oh my gosh i'm gonna sell my
26 shares because i can't handle it anymore i'm gonna cut my losses the stock mark oh my god we're
in a crash it's going to crash it's going to crash guys which means that your total cost basis that
means how much you actually put into this was 12 034.49 and because you decided to sell because you
were in extreme fear you now lost a total of three hundred and fifteen dollars because your portfolio
balance at the time that you decided to sell out of fear was only eleven thousand seven hundred and
eighteen dollars so you were all about the hype you were so excited everything was looking great
and then you decided oh my god it's it's failing i need to just cut my losses now this might sound
kind of absurd but you'll be surprised how many new investors actually do this and quite frankly
if you're one of those new investors who has done this i feel you but hopefully this video helps you
in feeling a little bit more confident about your investment decisions because if they would have
just held on and said okay i'm going to close my app i'm not going to look at my portfolio balance
if you're looking at this at 450 a share if they would have just held on a little bit it goes back
up to 470 a share in december december 13th they could have actually sold for a little bit of a
profit if they would have just held on a little bit just a little bit but they didn't they sold
and now they have zero shares all the way through the sphere territory all the way to oh december
27th we're now on greed somebody on youtube says hey the stock market's going back up i'm bullish
i'm all in to the moon and so they decide to start buying once again one share every single
day and as you can see this continues on all the way through they hold off on this period when
we're in neutral territory by three more shares now we're up to about 10 shares and then all of
a sudden here we go again fear sets in at the end of january and then extreme fear sets in and they
say i can't take it anymore this is too scary here we are again the stock market is an absolute scam
so they decide to sell 10 shares and uh because of that yeah their 10 shares their cost basis was 4
735 but unfortunately the portfolio balance at the time of selling is only 4 320 which means
they're losing yet again another 415 dollars so now they're up to losing up here when they first
sold 315 and then down here they lost another 415. i don't like losing 700. but again you'll
be surprised how many people do this and i don't know about you guys but what an incredible time
i mean the fact that we were in a sphere territory all the way through and look at this
the prices went as low as the 390s on spy the s p 500 man what a terrible summer it has been in
fact what a terrible 2022 it has been but in this case this person has lost a total of 817 because
of their silliness of only buying when the market goes up and freaking out when the market goes down
dollars meanwhile we have somebody else this somebody else does the opposite effect they
listen to warren buffett when warren buffett said be fearful when people are greedy and be greedy
when people are fearful kind of the other opposite of newbie mccut so we have vecna mcfearbucks
vecna because you know it's close to halloween and we like stranger things and then mcfear bucks
because i'm gonna build my wealth based on your fear so they buy one share because we're in fear
territory on september 27th and then they just hold off because we go into greed and they're
not going to buy when the market's greedy because they're listening to warren buffett so here they
are it's the opposite of fact not waiting waiting waiting wait oh extreme greed i'm going to sell
now because we're in extreme greed and it's you know this is exciting so i sell which means i make
a profit of 25 bucks because my cost basis was 443 dollars my one share i bought back here was
going for 4.43 only have one share so that is what it is but my portfolio balance is now up to 469
making 25 bucks yeah not a lot but it was worth it right we stay in greed and then all of a sudden
day after thanksgiving just like before we go into fear territory now that mcfear bucks is excited
he's going to start buying a single share of sby every single day so here we are in fear bye bye
bye extreme fear bye bye bye this person keeps on buying and then he holds because on december 27th
we go back into greed territory but check it out this person now has 20 shares at a cost basis of 9
262 and a total of 9 441 of their portfolio balance which means they're up on their money
179 dollars if they decided to sell on this greed day they would have earned 179 dollars of profit
meanwhile over here noob mccuts well he's starting to buy because he's freaking out and excited but
uh he has nothing to show for it he's been losing money so back over here to vekner mcfear box
he stops buying because we're in greed territory neutral he's still waiting trying to see what
the market's going to do oh the market goes back into fear on january 21st so guess what he's doing
buying more shares here we go extreme fear he's buying he's buying he's buying he's buying oh
my gosh now we're down into march oh we're gonna hold for a second because now we're in neutral and
greed territory but now this person's up to a nice awesome 62 shares at a portfolio balance of 27
774 and then we go into the summer of fear like i talked about and this person just keeps on keeping
on look at that 111 buy and buy and buying every single day they work their way up to an incredible
august 3rd at the beginning of this month for 141 shares this person owns 141 shares of spy because
they only bought when the market was in fear and now yet again they're continuing to buy buy buy
because we started the morning on fear territory now that we're in neutral it's pretty interesting
but let's just say okay here we are at 146 shares as of the recording of this video
right now this person did put in 61 000 over that long period of time
their portfolio balance is only 58 721 so yeah they are down if they sold today they'd be down
2 600 but they're not going to why because vector mcfear bucks does not sell on fear he sells on
extreme greed so what would have to happen now is through the period of the next couple months
in 2022 if we get back up into extreme greed territory vecne mcfear bucks is probably going
to have a lot more shares than he does currently and he's probably going to be extremely positive
because at the end of the day if you would even think let's say it goes up to i don't know 431
because that is the average over this period of time that we've been tracking so 431 dollars
is the average let's say it goes back up to that so if we have 431 dollars a share times 146 shares
his balance would be worth 62 926. we subtract his cost basis of 61 4 16 15. he's positive 1 509
do you see the difference here between timing the market on fear versus timing the market on greed
that is pretty darn interesting because the other day somebody said to me you know what i uh i'm
gonna stop investing for a little bit because the market's just going down and i'm like why not that
this is financial advice that's not the point of this but if you're only going to invest when
the market is up and you're going to freak out when the market is down you're going to end up
like newbie mccut and i don't know about you but i kind of want to be like vec mcfear bucks because
uh long time for him looks pretty darn sexy now let's make some sense out of this if we go over to
that portfolio visualizer that we always like to look at on this channel and what we're going to do
is in the year 2000 i'm going to use myself as an example here we are 22 years later right i'm going
to invest 500 every single month into spy and whether it's in a retirement account brokerage
account doesn't really matter 500 bucks a month why because 500 a month is all i can afford
instead of getting a car payment and putting that car payment of 500 into the car i'm gonna put it
into spy inflation adjust don't really care i'm doing 500 a month i know 500 a month in 2000 was
a lot more money than 500 in 2022 but regardless i'm just staying consistent so every single month
500 bucks into spy what would that balance be today well that balance would have grown to 568
437 that's a return of 37 percent and this person unlike our other two people they don't
really care if the market's up or down they're just dollar cost averaging every single month i
don't care for an extreme greed i don't care if we're in extreme fear 500 bucks is going into
spy meanwhile the other two are freaking out about okay well we're in greed so i'm going to buy oh no
we're in fear so i'm going to sell now they're not thinking about that so 22 years times 12 months in
a year means there's 264 months that you've been investing we multiply that by five hundred dollars
that you've been putting in which means you put in a total of 132 thousand dollars over the last 22
years and your balance is now 568 thousand you only put in 132 000 of your hard earned money
but in return you're getting 568 so if we take the 132 000 and we do that 568 437 minus 132 thousand
132 000 that's 436 000 earned made out of the stock market you earn 400 000
just by being consistent screw the car i wish you know i'm talking to my former
self and i wish i could go back in time slap myself about four times and say you dummy
stop doing stupid [ __ ] instead put 500 into the stock market every single month for the next
22 years it's gonna feel like eternity but if you just did it man you could have made
436 000 extra dollars outside of the hard-earned money that you put into the stock market do you
see the difference between time in the market and just being consistent what are your thoughts on
this whole thing comment down below check out this other video next on this other surprising
way that you could make up to 1.2 million dollars and we'll see you on the next video