Even experienced investors don’t like to see their investments fall below the amount invested, especially when it happens immediately. But it can be very troubling for new or inexperienced investors.
Seeing your portfolio value decline can lead to significant regret, second-guessing or even exiting investments that are only days or weeks old. However, the reality is that the market goes down almost as much as it goes up. Oftentimes based only on sentiment or general news.
Our research of the S&P/NZX20 over the last 15 years shows that the market was down 46% of days and 31% of weeks.
This is one of the key reasons why we recommend investing is for the long term (meaning years) because trying to “time the market” in the short-term is little more than gambling or trying to decipher the madness of crowds.
Of course, we also wish it didn’t happen either because it’s a negative experience for customers, and not the purpose of investing. But the reality of a highly liquid market means that the price the last person accepted for a sale is the valuation for all other investors. Even if investors don’t intend or want to sell.
However, the longer your time period, the less chance of a negative return. Since 2007, those investing in the S&P/NZX 20 had a negative 12-month performance on just 14% of the days started. So the moral here is, know your timeframe and ensure you are selecting your investments accordingly, rather than fretting about every bump in the road.
Interested to chat more about market movements? Email our friendly team at email@example.com.
Data period: 1 January 2007 to 28 February 2021