In the early stages of this crisis we shared several views from our investment partners which, although conflicting in certain aspects, were all consistent with the advice to ‘stay calm and remain invested’. So far, financial markets have rebounded well, but there is little doubt a bumpy journey lies ahead until a vaccination is proven to work and can be distributed to all. The coronavirus pandemic will fundamentally change many aspects of our way of life. Some of these changes will be positive, while others will pose new challenges for the post-Covid-19 world to overcome.
Over the past 20 years, several major global events – including, most recently, the coronavirus pandemic – have prompted a fleeing of financial markets, but data shows this would have been a mistake.
In the attached article we consider how not being fully invested for just 10 of the best performing days over this period could have led to a portfolio’s significant underperformance over the long term.
Financial markets have behaved in an extremely volatile manner since February, and in such conditions, it is tempting to consider exiting these markets or switching to cash, with the intention of reducing further expected losses. While sharp declines can be disconcerting, it is crucial to understand that remaining invested over a long-time frame, through the various ‘ups and downs’, tends to be the better option in achieving longer term investment goals.
Trying to ‘time the market’ is a strategy that carries with it the risk of missing out on some better periods of market performance, which is why ‘time in the market’ remains the time-tested better solution. It is often said that when riding a really scary rollercoaster the only people who get hurt are those who jump off !
Volatility will play with your emotions, and hard is it may be, focus and remember why you invested in the first place.
Keep safe and well….we will get through this!