This article is an educational piece on the importance of taking a long-term investing approach. For informational purposes only.
Investments should be built for the long term
“Trading” and “investing” are frequently used interchangeably. Both terms represent putting your money into financial assets such as stocks, exchange-traded funds, and unit trusts to grow your money, but they mean very different approaches. “Trading” activity tends to time the market to buy low and sell high, in hopes to make profits over a shorter term. By contrast, “investing” means spending time being invested in suitable financial instruments and taking a steady approach to grow the value of one’s investments over the long term. Of course, there are others who take a combined approach of trading and investing to meet their short-term and long-terms goals.
At Standard Chartered, we believe spending time in the market is a key strategy to achieving one’s core financial goals. While we understand that with a global recession on the horizon, it is natural to feel uneasy and want to react, it is however important not to lose sight of your long-term investment goals. As such, “Time in the Market” with well advised adjustments to your portfolio will likely prevail over “Timing the Market” during this critical period. Read on to find out how to stay disciplined and work towards your long-term goals.
Time in the Market, Not Timing the Market
As the old investment adage goes, “it’s not about timing the market, but about time in the market.” Here are three reasons why “Time in the Market” matters more than “Timing the Market.”
#1. The exact peaks and troughs of the market are difficult to predict, if not impossible.
Buying low and selling high by timing the market is an idealistic concept that few people are able to consistently succeed at. A combination of skill and fortuity is needed to accurately predict market peaks and to catch the right time for repurchasing.
#2. You are less likely to fall prey to emotional investing.
Timing the market can be emotionally exhaustive, as you have to monitor your investments constantly and battle emotional highs and lows. By prioritising your time in the market, you can better focus on your investment objectives and avoid making impulsive decisions that are led by optimism or fear.
#3. A consistent approach rides out bumps and helps you avoid accidentally missing some of the best performing days.
Timing the market wrongly may lead to missing some of the market’s best performing days. By staying invested, you can cushion the impact of market fluctuations over time.
The bottom line
Economic downturns do not last forever, and the economy will eventually recover. The crucial thing to remember during this time is to stay focused and true to your long-term investment goals.
At Standard Chartered, our ‘Today, Tomorrow, and Forever’ approach to Wealth Management is designed to help you meet your near-term needs and grow your wealth for the decades ahead. Growing and protecting your wealth successfully requires following a few important principles. “Time in the Market” is one important guardrail to keep your investing on the right track. If you would like to find out more, you may visit our SC Wealth Select website.
