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Time in the Market, not timing the market

The current crisis between Russia and Ukraine is highly volatile and fluid, we acknowledge the extremity and the unpredictability of the situation. We have confidence in our investment manager’s level of experience and deep insights across sectors and regions that will position them well to identify the opportunities as they emerge.

One of the biggest obstacles in achieving appropriate investor outcomes is behaviour. Fear and greed drive us to make irrational decisions at the most inappropriate times.

The chart above shows that if you missed just 40 of the best days from 1995 to 2020, you would have achieved a return of just 2.2%. versus staying put with your investments and gaining 8%. Admittedly, if you missed the 40 worst days you could have achieved a return of 15.8% however, I do not know of an investor that has been able to time the market to perfection! Hence why you may have heard the adage “its time in the market not timing the market” that gets us to our investment goals.

Its times like this that it’s so important to remain focused on the long term and not join the rollercoaster of investor emotion that goes like this:

Prior to the invasion of Ukraine by Russia, there was considerable concern about the prospect of interest rate increases and the end of bond buying by the US Federal Reserve. However, we view the inevitable move towards normalisation of interest rates around major world economies as a fundamentally positive development as central banks feel sufficiently confident in the strength of economic growth and full or near full employment markets to adjust the accommodative monetary policy towards more normal parameters.

The Russian invasion of Ukraine could impact markets and economies in several ways, most notably at present it has forced the oil price higher and increased fuel costs. This has effectively imposed a tax on consumption and may ultimately delay the rise in interest rates. This is likely to create a period of stagnant growth with higher prices referred to as stagflation.

This year, market volatility will continue. Portfolio diversification is key and the time when defensive assets like gold and bonds will protect on the downside.

General Advice Warning - This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial or tax adviser before making any investment decisions.


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