Time in the Market, not Timing the Market

Feb

19

The performance of the Next Generation funds continues to rebound after the market shock in the 4th quarter of 2018. During January the Growth fund rose over 3%, and is up 5% since the year-end, while the Defensive fund rose over 1.5%. Click HERE for the latest performance update.

The lesson for all investors here is that as long as you are invested in your correct risk strategy, and for the medium to long term, you should stay invested and “ride the wave”.

Once again, the saying that you make money through time in the market; not timing the market, is proven correct.

If we look at the events of the last three months, most stock market performance has been driven by statements from the Chairman of the Federal Reserve, Powell, whose comments have signalled changes in US interest rates from increases of 0.5% to reductions of 0.25%, causing markets to fall and rise depending on the statement.

If you had tried to time the market, you would have had to have sold before the “hawkish” statement in October, and then bought back before the “dovish” statement on the 4th January to maximise your gains. The chance of an ordinary investor getting one of those decisions correct is low; to get both right would be almost impossible. Most people sell and buy back too late missing both the top and bottom of the market, with the result being that they would invariably be better off leaving the portfolio invested. Moreover, once you take into account the costs involved with buying and selling, the performance would be even worse.

The moral of the story for medium to long term investors is not to panic, stay true to their strategy and remain invested through market turbulence.

Forth Capital specialises in expat pensions and investments  – to speak to one of our advisers click here or call 00 41 22 311 1441.

The Author

Robert Harris

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