Feeling Lucky? Don’t Chance It with Your Investments

Feeling Lucky? Don't Chance It with Your Investments

If the recent rally has you feeling lucky about jumping in or out of the markets, this may cost your portfolio. No one knows how the markets will move next, which makes it difficult to time when to buy or sell. Research consistently shows that trying to time the market can lower your returns substantially.

Instead of being distracted by short-term trends that may temporarily affect the markets, keep your goals in mind. If you’re investing for retirement, it may be better to limit portfolio reviews to a set schedule, instead of when you may be reacting to headlines.

The Cost of Market Timing

Your chances of generating a positive return improves the longer you stay fully invested. Research confirms your best strategy is not trying to time the market, but spending time “in” the market. Of course, this doesn’t ensure a profit or guard against a loss when markets decline, and past performance is no guarantee of future results.

Time is on your side

If you had been investing in the last 15 years, your chances of generating a positive return would have improved the longer you held onto the investments.

The longer you would have held,
the greater your chance for positive returns


Put Time on Your Side
As of 12/31/2016.
The percentage of negative versus positive annualized returns for the S&P 500 Index, over one, five, 10 and 15 calendar year holdings (1926-2016).
This hypothetical situation contains assumptions that are intended for illustrative purposes only and are not representative of the performance of any security. There is no assurance similar results can be achieved, and this information should not be relied upon as a specific recommendation to buy or sell securities. Sources see footnote 1 below.

Your Long-Term Goals Deserve an Established Approach

Markets are going to change. And when that happens, you may be tempted to jump out. Taking chances like that could affect your long-term investments. And it may even cause you to miss out on the best days in the market. Look at the drastic difference below – $9,000 vs $43,000!

Jumping in and out of the market may cost your portfolio

Missed Best Days in the Market
Growth of $10,000 in the S&P 500, 20 Years Ending December 31, 2016 Source: FactSet.

Three Tips to Consider Implementing Now

Make it automatic

One way to be sure you regularly invest for your future and take advantage of market swings is to use an automatic investment plan. Having one in place may help you from letting emotions drive your investing decisions.

Mix it up

Create a portfolio that is a mix of stocks, bonds and money markets securities – called asset allocation. When you spread your investments across different types of assets you may lower your overall risk2.

Check in

At least once a year, make sure your portfolio still meets your goals, comfort level with risk and timeline. If things have changed, use our Investment Planner or call us to help get back on track.

The bottom line?  Don’t count on luck – make informed decisions. Your investment goals are important. You can save yourself unnecessary stress and anxiety in the short-term if you have your long-term plan in place.

Sources: Global Financial Data Inc., FactSet; Standard & Poor’s; American Century Investments. The chart shows holdings of 90 one-year periods, 86 five-year periods, 81 ten-year periods and 76 fifteen-year periods. The data assumes reinvestment of all income and does not account for taxes or transaction costs.Stocks are not guaranteed and are more volatile than other asset classes. Stocks provide ownership in corporations that intend to provide growth and/or current income. Capital gains and dividends received may be taxed in the year received. An investment cannot be made directly in an index.

This strategy doesn’t assure a profit. It is possible to lose money with an asset allocation and diversification plan.

For educational use only. This information is not intended to serve as investment advice.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.