If you are still not convinced that trying to time the market is an unwinnable strategy, you don’t need to go much farther back than the last few weeks. After a 15% decline the third week of March, the S&P 500 posted its largest weekly gain since 1933 of 10.2% the next week. And on April 6th, the index posted a one day gain of nearly 8%. In all, the S&P 500 has risen 19.1% above its March low.
The difficulty of trying to time the markets is illustrated in this graphic from Dimensional. The Cost of Trying to Time the Market.
Instead of focusing on the short term gyrations of the market, maybe we should be paying attention to other things. Do you have a financial plan aimed at meeting your personal and financial goals? Do you have a household budget? When was the last time you took a close look at how much you are spending and where your dollars are going? Can you save more?
Staying invested doesn’t mean you shouldn’t take a critical view of the makeup of your investments. Periodic rebalancing will insure that your investments stay consistent with your goals. A diversified portfolio is not just about having the right mix of stocks and bonds. Diversification can be enhanced by using alternative assets like real estate and, depending on your situation, different insurance products.
Finally, there is no denying the human element that goes with being an investor. Our feelings about money and financial security can often lead us to make bad decisions. This is where the value of working with financial advisor can be most evident. If you don’t have an advisor (one that leads with planning) you should consider it.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Neither rebalancing nor diversification protect against market risk.