The markets’ current volatility and the resulting headlines are causing many investors to wonder whether they should make changes to their investments in response to the uncertainty. But, time and time again, we have seen that, during a decline, market psychology takes an emotional turn that translates into unfavourable decisions for those who seek immediate relief by reacting to the news.
Accumulating capital by focusing on the long term
The simulation below illustrates the case of a hypothetical investor who, on three occasions, invested $10,000 at the worst possible time:
But by maintaining a long-term approach and staying invested, rather than trying to predict short-term movements, such an investor can successfully accumulate capital over time.
Short-term movements difficult to predict
This demonstration illustrates two phenomena that are typical of the financial markets: the difficulty of predicting their direction in the very short term and their tendency to rebound subsequently. Thus an investor’s worst enemy is attempting to time transactions perfectly by buying before a rally or selling before a decline. Empirical studies show that investors who give in to this temptation more often than not find themselves undermining their performance, rather than enhancing it.
It is therefore essential to stick to your strategy and maintain a diversified, long-term investment approach. It’s the investment philosophy that Gestion FÉRIQUE and its managers abide by. This philosophy allows us to get through turbulent times and increase our capital over the long term.
This review has been prepared for the general information of our clients and does not constitute an offer or solicitation to buy or sell any securities, products or services and should not be construed as specific investment advice. All opinions and estimates expressed in this document are as of the time of its publication and are subject to change. The information contained in this document has been obtained from sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. The content of this presentation is the exclusive property of Gestion FÉRIQUE and should not be further distributed without prior consent of Gestion FÉRIQUE.