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November 4, 2016 by Michelle Morris

10 Reasons Why You Should Not Try to Time the Market

Hello!

Market volatility, wide swings in its value, is often distressing to investors. The temptation to get out can be strong.

But it isn’t market timing that matters – it is time in the market!

Read on to learn more!
Best,

Michelle Morris, CFP®, EA
BRIO Financial Planning

 

If you invested $10,000 in the S&P 500 index (an index mutual fund owning the 500 largest stocks in the US) on January 2, 1996 and held for 20 years until December 31, 2015 you would have $48,230. This is an 8.18% annualized return.

This assumes you stayed fully invested for the entire 20 years, or a little over 5,000 trading days.

If you missed the 10 best days, you would have only $24,070. Your return reduced by almost $25,000!

If you missed the 30 best days, your return is NEGATIVE! Missing the 30 best days out of 5,000 would result in $9,908.

This graphic from  J.P. Morgan Guide to Retirement 2016 Edition tells the whole story.**

page-35-page-001

Currently the top holdings in the S&P 500 are Apple, Google, Microsoft, Exxon Mobil, and Amazon. Companies you’ve heard of. Odds are good you use some of their products/services.

Twenty years may seem like a long time, but even my oldest client probably has a 20 year investing horizon left. My youngest client probably has close to 70!  

When do these best days happen? 6 of the 10 best days occurred within two weeks of the 10 worst days. Volatility can be tough to stomach – but getting out of the market due to emotions is a losing strategy.

The important thing is to have a plan! Devise an asset allocation (% of portfolio devoted to stocks vs. bonds/cash) that is appropriate for YOU and your circumstances. And stick with it.

Save. Invest. Repeat. Don’t miss the best days.

**I do not have any affiliation with J.P. Morgan

Topics: Filed Under: Investing

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From the Blog

  • How Much Federal Income Tax Do You Actually Pay?
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Investment advisory products and services are offered through advisory representatives of BRIO Financial Planning, an investment advisor registered with the Commonwealth of Massachusetts.

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Contact Us

Michelle Morris, CFP® EA
BRIO Financial Planning
1073 Hancock St. #101
Quincy, MA 02169

michelle@briofp.com
617-934-0419 (phone)
617-934-1933 (fax)

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