9December 2022op 10 SD WAN Solution Providers in Europe/UK 2021I've got a few clients who always try to time the market and get out of stocks when things get scary and get back in when things are looking up again. Please don't do thatop 10 SD WAN Solution Providers in Europe/UK 2021op 10 SD WAN Solution Providers in Europe/UK 2021chance you could lose money over the next 5 years investing in stocks. You'll notice bonds have a tighter range of returns with -2% to the downside and 23% to the upside. Now we get into the fun part ­ diversification. Look back up at the same 5-year chart for a portfolio equally split among stocks and bonds. Going back to 1950, there have been no rolling 5-year periods where a 50/50 portfolio has lost money.You can also see that over a 20-year period, the floor on returns for a 50/50 portfolio has been 5% with an upside of 14%. This is what drives our buy and hold mentality. We know that a diversified portfolio has always made money if you stay the course. I've got a few clients who always try to time the market and get out of stocks when things get scary and get back in when things are looking up again. Please don't do that. I like to share this next chart with them to show how market timing typically damages your portfolio more than it helps. This chart shows a shorter period than the first but captures the world in which we saw the dotcom bubble burst, the great financial crisis play out over several years, and the covid drop in 2020. You'll notice the average investor made around 2.9% over this 20-year period while a diversified portfolio made around double that. The reason is that the best days typically happen while you are out of the market. By the time people are comfortable enough to get back in, the best days are already behind us. Below I have one more chart that shows the impact of missing out on the best days. You only have to miss the best 20 days over a 20-year period for your returns to drop down near that "Average Investor" return in the chart above.Hopefully this gives you a little more insight on why we're always encouraging people to "stay the course" on their investment strategy.
< Page 8 | Page 10 >