Thank you very much for all of the birthday well wishes and sweet gifts. Sophia and I cherish our joint birthday and always appreciate all that you do. We are now 43 and 11 and are both increasingly aware of how fast time passes. This week’s article/blog are dedicated to the issue of “time”.
The Best Days
Timing the Market
One of the first things financial advisors learn to say to clients is “you can’t time the market”. Much research has been done on what happens when people try. Many charts demonstrate that if an investor gets nervous, sells, and then tries to time reentry, the best days many times are missed. By simply missing the single best day or best five days can, according to some charts, alter your return for the year greatly. I’m sure the charts are true. I am sure that timing schemes probably fail as often as they succeed.
That’s not why people try to time the market. The best days aren’t the reason, the worst are.
Bad days leave investors feeling vulnerable and there’s nothing even remotely wrong with that. But, things can go wrong when this happens. Here is my short list of things you can do to hopefully get your fair share of the best days while not exhausting yourself trying to time the market.
1) Make certain that your Investment Policy Statement is synched with your present goals, needs, and risk tolerance.
2) Beware of seminars and meetings that introduce new products designed to cure what ails you and everyone else sitting in the room.
3) Check your buckets. You should have at least three (cash reserve/emergency funds, goal funding, and retirement).
4) Do the math. You don’t need to time the market perfectly if you have some time, don’t waste time, and understand the time value of money.
I honestly believe, from many years of experience running this firm, that the investors that keep these four things in mind have more of those “best days” than those that don’t.
Until next week,
Susan R. Linkous