Return VS investment timing

Of course we can analyse each company business and its other non operating asset to come out with our valuation. But the valuation depends on our expectation, and our expectation is influenced by current market situation. Of course we can made our investment decision according to our valuation, whether it is overvalue or undervalue. To be safe, we try to tweak our expectation towards conservative when we do valuation for investment purpose, and tweak our expectation towards more aggressive when we do valuation for the purpose of selling.

But most of the time, we underestimate extremity of investor behaviour as how undervalue the valuation will go, and how overvalue the valuation will go. So we tend to buy in too early and sell out too early. We also underestimate how good the economy will bring and sell too early; and underestimate how severe the economy will go down and buy too early. And economy is always the most decisive factor to determine how much return one will make.

The best return is is made during investment in the bottom of the business cycle, and sell during the peak of the business cycle.
The second best return is made during investment in dip along the business cycle.
The third best return is made during investment in confusion of market, but we realised that the future is still promising.

It is very easy to misjudge the economy stage. We loss money if we invest but don't see the economy downturn coming or underestimate the severity of the downturn. We incur huge opportunity cost if we hold too much cash and don't realise the economy is actually slowly moving upwards or underestimate the prosperity of the economy.