Time in the market: An Islamic Perspective

Time in the market is better than timing the market.

This is a concept in the investment world where investing consistently in the capital market going through its ups & downs is a better strategy than trying to predict the best time to invest and gain better profits during the time.

This concept is not agreed upon though.

It is a constant discussion between investors on which strategy is better.

However, as Ramadan just passed, I realised that there are similarities in us searching for the best return of investment in our wealth and us as Muslims searching for the best return of rewards in our good deeds.

Laylatul Qadr

The best example is Laylatul Qadr.

A night in which Allah and our beloved Prophet Muhammad peace be upon Him enlightened us that the reward of a good deed performed during that night is more than performing good deeds in 1000 months.

In the financial world, this is considered as the best investment x1000 returns.

However, this blessed night was not specified by our beloved Prophet peace be upon Him. It is only known that it is in Ramadan and the scholars narrowed it down to the last ten days of Ramadan according to the saying of our beloved Prophet:

Search for Lailat-ul-Qadr (Night of Decree) in the last ten nights of Ramadan

In another narration, our Prophet narrowed it down to the odd numbers of the ten days

Seek Lailat-ul-Qadr (Night of Decree) in the odd nights out of the last ten nights of Ramadan.

Timing Laylatul Qadr

Because of the special rewards bestowed upon Laylatul Qadr, we start to search for the night and trying to ensure that we go all out in performing our prayers and good deeds on the night.

For those focused on getting Laylatul Qadr only, they will perform prayers and good deeds only during the odd days in the last ten days and when there are apparent signs of the blessed night such as serenity during the night etc.

Imagine if we prayed the whole night during Laylatul Qadr, how much rewards we would have gained.

This is similar to investors trying figure out the best time to invest which is when the price is low and the market is going to take off.

Investors try to time the market so they can put all their wealth and multiply them all in go.

However, no one knows when the market is poised for profits.

Hence, the similarity of Laylatul Qadr and the best time to invest is that no one knows except for Allah the Almighty.

This is one strategy in order for us to get the best ROI in our good deeds as well in our investment.

Time in the nights of Ramadan

However, there is another strategy which you can adopt that is far more effective and guaranteed to profit which is to always be performing in the nights of Ramadan.

Let us imagine, performing prayers and good deeds in all of the nights of Ramadan this year, will we be able to get Laylatul Qadr ?

The answer is absolutely yes!

Because we showed up every single day and invest our time and energy to perform good deeds, surely we will hit Laylatul Qadr.

This is similar to investors who are always investing in the capital market. Because they are consistently in the market, they will eventually be there when it is the best time to invest.

The key here is not to go all out in the nights as we will be burned out.

Rather, consistency is the most important even if the act is small.

This is one boring strategy but nevertheless effective. This is what we call time in the market

Time in the market vs Timing the market

The question here is not which is better but rather the question is

Which strategy are we choosing?

Timing the market requires intelligence, hindsight and fortune to achieve the best return of investment. We might not get the best time to invest as well as the blessed night if we chose wrongly

On the other hand, time in the market requires us to be consistent, hardworking and discipline. We will surely be in the market when the price is right. But the probability of one committing to the plan might be low.

Hence, the choice is on us now for both our ROI in good deeds as well in investments.

Do we want to time the market as well as the night?

Or do we want to always be in the market and always be performing good deeds every night so that we surely hit the jackpot?

Which one do you choose?