Once there is turbulence in financial markets, there can always be a temptation to adjust a portfolio.
Sometimes this adjustment is for sound reasons, such as taking advantage of low asset prices to add to a portfolio. Other times though, it can be due to fear of losing more.
History has taught us time and again that picking a high or a low in any market is almost impossible. No good fund manager ever makes such a claim. The real issue for investors who sell out in a down market is trying to work out when to go back into the market!
A great quote in a recent article is attributed to William Bernstein, a renowned investor. “There are two kinds of investors, be they large or small: Those that don’t know where the market is headed and those who don’t know that they don’t know.”
The big US fund manager Vanguard produced some valuable statistics to highlight the dangers of trying to pick winners. The study was conducted on the Australian Stock Exchange index from 1972 to 2022. It found that over those 50 years, if you missed the best 30 days your overall return would have dropped from 10.8% to 7.3%. Furthermore, half of those good days occurred within a week of the worst days.
Overall, it is our view that successful investing involves having a well-planned and diversified investment strategy that’s aligned to your specific goals and time frames, and by having the discipline, support and commitment to stay the course, even when it feels most uncomfortable to do so