Markets are down, is now the time to invest?

As of February 3rd 2014, taking the S&P 500 as a benchmark, markets are down over 5% since January 21st. They are now trading at approximately October 31st 2013 levels as you will see from the graph below.

 

S&P 500

S&P 500 1 year performance to February 3rd 2014

 

If  you want to try and time your entry into the markets in order to try and get in at the bottom, just as the markets are turning upwards. I recommend you don’t try and do this.

 

It time, not timing.

When you look back in 5 + years time whether you invest now or wait until next week will have very little significance in the grand scheme of things. However if you miss time your re-entry into the market and you miss the bounce it could have more of a negative impact than you could imagine.

The graph below outlines the impact of missing just one day performances. So for example if you left $1000 invested in the S&P 500 from January 1 1970 to December 31st 2011 you would have received a return of 9.8% per annum. If you happened to miss just the one single day that turned out to be the best day that return drops to 9.51%. Miss the 25 best single days and your return drops all the way to 6.11% per annum.

Market Timing

Miss the best days and damage your wealth

 

 

The best time to invest? When you have the money! Waiting to time the market can seriously damage your wealth in the long run, take the fact that markets are currently down as a bonus. Over the long term temporary market ups and downs are just noise.

We review clients investment portfolios on a regular basis , if you are not a client of ours and you haven’t had your current strategy reviewed recently. Or even worse still you are still sitting with most of your funds on deposit you should contact me on eoin@properous.ie or 045 854716 for a consultation. Our first meeting is always free.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *