An investment can often be compared to a rollercoaster ride – ups and downs are expected, with an element of risk. Watching the market through the highs and lows of the pandemic, I am sure that even the most courageous investor felt slightly uneasy.
As someone with an inherent dislike of rollercoasters, I can absolutely understand this feeling of trepidation, and the cure for this is similar to what I do when I go on a rollercoaster – I make sure I fully understand what I am getting on and remember to think of the feeling of accomplishment when the ride finally finishes.
I think the problem some people face when investing is that they don’t recognise the process as like a rollercoaster ride, so when the experience becomes uncomfortable or frightening, they want to jump off straight away. Recent research has shown that had you invested in the UK Stock Market over the last 15 years, your annualised return would have been 7.7%.
However, missing the best 10 days during that period would have reduced your return to 3.4% and missing the best 20 days to 0.8%! The golden rule to investing is allowing your investments plenty of time to achieve their full potential. Be patient – when stock markets become volatile it is usually best to resist changes to your long term strategy.
‘Time, not timing’ remains key to investing. You wouldn’t jump off a rollercoaster mid-way through, so jumping off where your investments are concerned is equally as bad a move. Just think of the end result, enjoy the ride and reap the long-term rewards.
PM&M Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.