In the perfect scenario you’d ride all the stock market’s ups and none of the downs. It may seem simple, but it is as much of a fantasy as owning your own private island; which is where you’d be if timing the stock market was that simple. Instead of taking the risk we encourage our clients to adopt a long-term view of investing which increases the likelihood of success.

Buying when on sale

This might seem like a no brainer, however when it comes to investing in the stock market people want to buy after stocks rise, not after they drop. It might be the only industry that when everything goes on sale, no one wants to buy it. Market lows often result in emotional decision making. The key is to not be afraid of the market because buying low can provide you good value.

What you might miss if you wait

The potential downside of not being consistently invested is why we urge investors to buy investments and hold them for the long term. By ignoring market cycles and draw downs you can receive the benefit of compound interest.

From the chart above you can see if you attempt to time the market and miss out of the best days, you have potential to significantly reduce your overall performance. It is normal to see some of the worst and best days of the market so close together. For example six of the best 10 days occurred within two weeks of the 10 worst days. The best day of 2015, August 26, was only 2 days after the worst day August 24. Obviously, missing the worst days would notably improve one’s returns, but those are no easier to predict ahead of time.
For more information on thinking long-term when investing, listen to my interview with Clay Moden on 106.5FM WYRK.

WEEKLY SEGMENT ON WYRK

You can catch our weekly Plan.Protect.Invest. segment live on WYRK 106.5FM at 7:20am every Wednesday. Each week we will have a Sgroi Financial planner on with Clay Moden and the WYRK morning show to discuss financial topics to educate and help their listeners. Since 1971, Sgroi Financial has proudly served Buffalo, NY and the Western New York community from our West Seneca location.