Focus on time in market, not market timing

The results can be amazing

January 12, 2018

Welcome to 2018. As we look forward and make plans for the New Year I thought it would be beneficial to look back at the past 10 years as a guide on how to behave for the next 10. So often we think of returns as a linear concept. This is understandable because most financial planning software requires just that: linear return assumptions. However, in reality, actual returns do not behave like that.

Consider the following chart. This illustration shows how much $1,000 would be worth after 10 years of investment. Even with the world financial crisis of 2008 the original investment of $1,000 had grown to $1,465. It also shows how much it would be worth if an investor missed a certain number of trading days over those 10 years. The results are amazing. If the investor simply missed the 10 best trading days over those 10 years they would have experienced a 46% loss instead of a 46% gain! In fact, taking it one step further, the investor who missed 40 of the best days was left with just 30% of their original $1000 investment.

I think this is a fantastic example of why the key to long term investment success is time in the market and never market timing.

If you have concerns regarding your financial plan and investment strategy please contact me at 613.271.6610. If you would like to read more on this report let us know.