People often wonder whether it is a good or bad time to be in any particular investment market. Hindsight makes it seem like there are clear indicators either way.
Our friends in the advisor consulting group at Russell Investments have updated a demonstration that shows just how difficult it is to build wealth when trying to time entry and exit points into investments.
Consider the market timing graphic below. It exhibits the impact of missing relatively few high-return days investing in the broad U.S. stock market (Russell 3000) over 10 and 15-year periods.
Pay special attention to this startling evidence from the 10-year period: There are approximately 2,500 trading days over 10 years. If you missed just the 10 days with the highest daily return – 0.4% of the trading days over a decade – your ending wealth would be reduced by close to 50% from $9,798 to $4,920.
If your situation or your goals change, there is plenty of reason to change your investment strategy. But if it’s just a matter of whether you should be in or out along the way to your goals, this evidence makes it pretty clear why staying invested is important.
~ Brooks, Hughes & Jones, Partners in Wealth Management — Gary Brooks, CFP®, Allyn Hughes, CFP®, CLU, ChFC, Nancy Jones, CFP®
