June 17, 2019Individual Investment Management

Why Stay Invested?

How market timing can kill returns.
The market's gyrations are often unnerving, but there are good reasons why you need to be a long-term minded investor.  Whether you're an aggressive growth investor or take a moderate stance, attempting to "time" the market's best days will damage your return over time.  If you don't catch the market's best days with zero mistakes you will miss out. 

Example: December 2018
In December 2018, the market’s near 20% decline caused U.S. investors to pull $143 billion from actively managed funds.  This was the largest single-month fund outflow EVER recorded by Morningstar - and this proved to be hugely costly to investors.  The period that followed between Christmas and late January 2019 saw the market as defined by the S&P 500 rise nearly double digits as more seasoned investors saw a long-term opportunity.   

What Timing Can Cost You:
Between 1/1/1998 and 12/31/2017, here is what you would have missed had you not captured the market's full annual return by attempting to "time" the market by trading in and out.  We will use the S&P 500 as our example over this 20 year period:

What's the lesson?
Individuals have never demonstrated the ability to successfully and repeatedly trade in and out of markets in such a way to effectively capture full return.  Over longer periods, your results in the market will be permanently damaged if you don't stay fully invested!