{"id":7753,"date":"2022-12-05T12:01:08","date_gmt":"2022-12-05T01:31:08","guid":{"rendered":"https:\/\/adelaideprivatewealth.com.au\/the-challenges-of-market-timing\/"},"modified":"2022-12-05T12:01:08","modified_gmt":"2022-12-05T01:31:08","slug":"the-challenges-of-market-timing","status":"publish","type":"post","link":"https:\/\/adelaideprivatewealth.com.au\/the-challenges-of-market-timing\/","title":{"rendered":"The challenges of market timing"},"content":{"rendered":"
\n

When markets fall, it\u2019s natural to want to take action to prevent further losses. Doing so however can do more harm than good. Here\u2019s why timing the market to buy low and sell high is not as easy as it sounds.<\/strong><\/p>\n

If you\u2019re invested in the financial markets and also keeping up with the news, you\u2019re probably wondering if you should do anything to insulate your portfolio from incurring further losses alongside rising interest rates and inflation.<\/p>\n

\"\"<\/p>\n

In times like these, reminding investors to \u201cmaintain discipline\u201d and \u201cstay the course\u201d \u2013 in other words, stay invested and here\u2019s why:<\/p>\n

Reacting to the here and now<\/strong><\/h3>\n

Most market commentary are about the events of the day, with a focus on the here and now. However, the \u2018today\u2019 is not as significant to financial markets as they\u2019re generally forward looking and more concerned about what will happen in the future. Thus, using daily developments to make constant adjustments to your portfolio is unlikely to help you accumulate wealth over the long term as the market will have already priced it in.<\/p>\n

Additionally, to successfully time the market, investors need to get all\u00a0five of these investment factors\u00a0right including precisely timing exit and re-entry \u2013 a near impossible feat for even the most experienced of investors.<\/p>\n

Locking in your losses<\/strong><\/h3>\n

When markets fall, it\u2019s natural to want to sell riskier assets (i.e. equities) and move to cash or safer assets like government securities. But exiting the share market now means locking in your losses permanently and not giving your portfolio the opportunity to benefit when markets recover.\u00a0Research\u00a0found that 80 per cent of investors who panicked and moved to cash during the 2020 sell off would have been better off if they had stayed invested1<\/sup>.<\/p>\n

Investing at the peak<\/strong><\/h3>\n

While we all want to \u201cbuy low and sell high\u201d so our portfolios can outperform the market average, in reality, it is extremely hard to execute perfectly every single time. Analysis of the last 5 decades reveals that even in the worst-case scenarios \u2013 where investors bought into the market at its peak, just before a dip \u2013 as long as investors stayed invested instead of moving to cash, they still benefited from positive annual returns of almost 11%.<\/p>\n

If the recent market volatility is keeping you up at night, take a moment to reflect on whether your emotions are short-term reactions to the current conditions, or something you really need to act on. If you feel like you cannot stomach temporary losses, consider if your asset allocation is right for your overall investment goals and risk appetite.<\/p>\n

A well-diversified core portfolio, aligned to your risk appetite will help spread your risk and afford you a margin of safety over the long term. Get this right and you will probably sleep better at night.<\/p>\n

Contact us on [phone] if you would like to discuss this further.<\/p>\n

Source: Vanguard<\/a><\/span><\/p>\n

1<\/sup>https:\/\/corporate.vanguard.com\/content\/dam\/corp\/research\/pdf\/Cash-panickers-Coronavirus-market-volatility-US-CVMV_072020_online.pdf<\/span><\/p>\n

Reproduced with permission of Vanguard Investments Australia Ltd<\/p>\n

Vanguard Investments Australia Ltd (ABN 72 072 881 086 \/ AFS Licence 227263) is the product issuer. We have not taken yours and your clients\u2019 circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our\u00a0PDS\u00a0or\u00a0Prospectus\u00a0online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.<\/p>\n

\u00a9 2022 Vanguard Investments Australia Ltd. All rights reserved.<\/p>\n

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/p>\n

The post The challenges of market timing<\/a> appeared first on MLC Contemporary<\/a>.<\/p>\n<\/div>\n

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When markets fall, it\u2019s natural to want to take action to prevent further losses. 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