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Time in the Market, Not Timing the Market

While the age-old philosophy of buy low, sell high seems a simple enough concept, it is easier said than done. Even for the brightest of professional traders, timing the market in such volatility is tough.

So, when the markets are as volatile as they have been this year, covid-19 being the catalyst, it inevitably sends our emotions into panic. We are human and our instinct often leads us to “protect the capital” and make some impulsive decisions that are not in line with our long-term strategy.

"It is important to maintain focus on facts, data and remain disciplined which is sometimes easier said than done."

Here is a little reminder, if you started with $10,000 in 1990 and invested in Australian Shares with no further investment, this would be $130,457, that is an average return of 8.9% per year in 2020! It has not been a smooth ride over the last 30 years and the market was impacted by economic, social and political influence, the data shows us that holding our position long term can be beneficial as part of a long term plan.

While all recoveries may not yield the same results, investors are well advised to stick with a long-term approach to investing. The appeal of market-timing is obvious—improving portfolio returns by avoiding periods of poor performance. However, timing the market consistently is extremely difficult. And unsuccessful market-timing (the more likely result) can lead to a significant opportunity loss.

Returns and principal invested in stocks are not guaranteed, and stocks have been more volatile than other asset classes. Holding a portfolio of securities for the long term does not ensure a profitable outcome and investing in securities always involves risk of loss, an important note to remember.

Engaging a professional advisor who will always consider your appetite for risk vs return, understand your goals and what you want to achieve with your investment, determine if it is a short or long-term investment, is paramount.

Our investment philosophy is centred around trusted relationships with our clients and selecting the products and services that are in our client’s best interest. We identify which investment model is most suited to your circumstances and wealth goals. 

Need professional advice around wealth planning or funding your retirement? Feel free to book in a time to speak with our 8 Collective Wealth team.

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