Time, Not Timing, Is the Key to Long Term Success

By Nathan Goodwin

thrill ride 2The stock market can be a wild ride. Recent history has been no different as domestic and international economics, government shutdowns and budgets, and investor confidence have impacted the market’s volatility. During these ups and downs, investors can be tempted to sell and get out of the market at the first sign of a downturn with the thought of buying back once the market has stabilized. While these investors may not consider themselves “market timers,” this is basically what they are.

History shows that the larger declines in the market typically occur in short periods of time. Likewise, big upward movements tend to do the same, many times occurring right after a market fall. Because of this, investors who try to limit their losses will historically come out far worse in the long run, even though in their mind it’s the safe play.

Missing just ten of the best days in the market can have a dramatic impact on portfolio returns. Consider the following:

Average annualized S&P 500 returns over 15 years:

If you stayed in the market: 9.88%
If you missed the best 10 days: 6.45%
If you missed the best 20 days: 3.80%

Many experts agree that investors will usually benefit by staying in the market, not attempting to change their long-term strategy because of short-term market movements. These figures showing the impact of missing market rebounds support that reasoning.

Time and time again market timers will lose in the long run. If you have a plan, stick to it and review yearly. If not, let us help you develop a plan for long term success.

*Information from Datestream

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