One of the key principles of long-term investing is to stay invested, especially during times when investing can feel like a rollercoaster ride.
When markets are volatile, identifying an opportunity and buying more during a correction is one thing, but jumping in and out of the market should generally be avoided.
History has proven that sharp falls in stock markets tend to be concentrated in short periods of time. Similarly, the biggest gains are often clustered together, and it is quite common for a large gain to follow a big fall (or vice versa).
Illustrated below is a sharp rebound after the previous day’s fall of some 7.14% in the S&P500 Index, the benchmark of America’s Top 500 companies rebounded a stellar 9.38%.
While most markets will experience periods of short-term volatility, over the long-term they generally maintain a steady, upwards path.
And those investors who remain invested will benefit the most from these long-term upward trends.
Though past performance is not a guide to the future, staying invested can be a way to capture as much growth from the market as possible and also reduce the odds of making a loss.
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DISCLAIMER: The views expressed here are solely those of the author in his private capacity and not necessarily to the author’s employer, organization, committee or other group or individual.