20 Second Advisor: Time Heals All Investment Wounds (Sort Of)

You’ve heard the phrase, “Time heals all wounds.”  Normally, this is discussed in a relationship context; however, the phrase has A LOT of meaning when it comes to investments.  Check out the graph below.  People tend to look at short term movements in the stock market and feel like they need to make a change to their investments.  As you can see, the US stock market had positive returns in 33 of the last 39 years (1979-2017).  6 of the years had negative returns (about 15% of the time).  Almost 50% of the time, a given year had an intra-year decline of AT LEAST 10%, yet most years ended with a positive return!  The moral of the story: Take a longer approach to investing.  When your time horizon is longer, you are better able to stay disciplined and capture returns when they occur in the global markets.  A long term approach also allows you to stay in your seat when markets inevitably decline.  Time really does heal most all investment wounds (although nothing is guaranteed!).

Exhibit 1 Recent Market Volatility

 

 

 

 

In US dollars. US Market is measured by the Russell 3000 Index. Largest Intra-Year Gain refers to the largest market increase from trough to peak during the year. Largest Intra-Year Decline refers to the largest market decrease from peak to trough during the year. Frank Russell Company is the source and owner of the trademarks, services marks, and copyrights related to Russell indexes.
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss.
There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. Investors should talk to their financial advisor prior to making any investment decision. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit.
All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their financial advisor prior to making any investment decision.

 

Leave a Comment