Investing? Stick with it!
Most investors are not good at investment decisions. That is, they’re not good at predicting short-term swings in the market.
More often than not, investors find themselves buying high and selling low. And when the markets starts falling, investors will panic, sell their investments, and sit on the sidelines.
Unfortunately, some of the biggest one-day upswings in the market occur during the very volatile periods that investors are scared of. It’s true that some investors have made good gains by knowing when to buy and sell but those who achieve this are in the minority and many of them are just lucky!
Additionally, most investors do not diversify sufficiently which is probably one of the biggest influencers of predictable performance in a portfolio. This in itself is a topic for another day!
The chart below shows investment performance for the American S&P 500 index. Yes, it’s a different market but the principle is the same for all markets.
Staying invested in a well-diversified and managed portfolio ensures that good investment periods are not missed. But, you have to ensure that the funds you have invested are available for investing over the longer term so that you are not forced to withdraw funds when markets are low.
Once you’ve accepted that a long term perspective is the way to invest, better investment decisions can be made that incorporate the amount of investment risk that you are willing to take and when and how you want access to the money.
It’s all part of financial planning, which funnily enough is what we do!!