CHART OF THE DAY: How A Few Poorly-Timed Trades Can Torpedo Two Decades Of Healthy Returns
Most investors are terrible at trading - that is, they're not good at predicting short-term swings in the market.
More often than not, investors find themselves buying high and selling low. And when the market starts selling off sharply, investors will panic, sell their own shares, and sit on the sidelines.
Unfortunately, some of the biggest one-day upswings in the market occur during these volatile periods.
In its 2014 Guide to Retirement, JP Morgan Asset Management illustrates what can happen to investor returns when they miss out on these good days.
For instance, if an investor stayed fully invested in the S&P 500 from 1993 to 2013, they would've had a 9.2% annualized return.
However, if trading resulted in them missing just the ten best days during that same period, then those annualized returns would collapse to 5.4%.
Missing these days do so much damage because those missed gains aren't able to compound during the rest of the investment holding period.
"Plan to stay invested," recommends JPM. "Trying to time the market is extremely difficult to do consistently. Market lows often result in emotional decision making. Investing for the long-term while managing volatility can result in a better retirement outcome."
- I quit McKinsey after 1.5 years. I was making over $200k but my mental health was shattered.
- Some Tesla factory workers realized they were laid off when security scanned their badges and sent them back on shuttles, sources say
- I tutor the children of some of Dubai's richest people. One of them paid me $3,000 to do his homework.
- Why are so many elite coaches moving to Western countries?
- Global GDP to face a 19% decline by 2050 due to climate change, study projects
- 5 things to keep in mind before taking a personal loan
- Markets face heavy fluctuations; settle lower taking downtrend to 4th day
- Move over Bollywood, audio shows are starting to enter the coveted ‘100 Crores Club’