We’ve all heard the saying: buy low, sell high! It’s one of the most common phrases associated with the markets. And it sounds simple enough, how difficult could it be to execute? If you time the market well, spectacular returns can be had, so the financial press says.
While this sounds great, the reality is it’s nearly impossible to do correctly. For example, the S&P 500 over a 30 year period up until 2013 achieved an annualized return of 8.4%, compared to the average individual investor, which got a mere 1.9%!
But why does this happen? The biggest culprit, market timing. Trying to predict when the market will go up or down. While it may make you feel safer to sell when the market is falling, consider this: Over a 20 year period ending 2014, if you missed just the 10 best days for the S&P500, your portfolio over this period would be worth half as much, compared to if you had stayed invested!
So out of over 5000 trading days, missing just those 10 leads to a massive difference. And yet, 6 of these 10 best days happened within only 2 weeks of one the 10 worst days. Patience and dedication pays off.
That is why we here at AFT Trivest Management believe in developing an investment plan that meets your specific needs and goals, and sticking to it, regardless of the state of the markets. As we often say, “It’s time in the market, not timing the market.”