Stay Invested - Keep Long-Term Potential Alive
Sometimes human instinct lets us down. Take the natural response some investors have to down markets: Sell to avoid possible losses and stay out of the market until things improve.
But while sitting on the sidelines might seem like a smart defensive move, it can actually be hazardous to your wealth. Time and again, statistics have shown that remaining invested through the markets' inevitable up and down cycles has been the wiser choice for long-term investors. Those who have tried to time the market have often ended up with lower returns.
Slow and Steady Wins the Race
However well-intentioned their market-timing tactics may be, investors too often end up chasing past winners, buying in just as the price turns down, or making the wrong guess about which will be the next hot stock. In addition to these mistakes, frequent turnover can increase trading costs and trigger unwanted capital gains, which further reduce returns.
Like the fabled race between the tortoise and the hare, the investor who moves steadily forward toward his or her goal may be more likely to succeed than the one who darts in and out of the market. Although past performance cannot guarantee future results, history shows that the patient investor who had held to a well-crafted strategy is likely to have the money available when opportunities emerge to invest in undervalued securities and areas of the market with long-term growth potential.
This article offers only an outline; it is not a definitive guide to all possible consequences and implications of any specific investment strategy. For this reason, be sure to seek advice from knowledgeable financial professionals.
The material discussed in this article is meant for general illustration and/or information purposes only and is not to be construed as specific tax or investment advice. Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual advice. Bear in mind that there is no guarantee that any specific goal will be met.
Scott E. Wiard is President of Horizons Planning Corporation, a fee-based Registered Investment Advisory firm located in Ann Arbor. He can be reached at (734) 761-3155.