Investors make decisions with imperfect information, and this can make investing interesting or scary. The good news is that time is an ally when it comes to investing.
Historically, investors in quality, well managed businesses with earnings growth, have been rewarded over time.
What about an investor today? Imagine you see one of these headlines:
- Markets hit new All-Time High: The investor asks, “is now the right time to be investing, shouldn’t we wait?” Wait for what?
- Markets hit multi-year low: An advisor says to their client, “Now is the time to invest”. One client’s reply, “shouldn’t we wait?” Wait for what?
The good news, according to this article in Forbes, the S&P 500 (from 1950-2020) returned 11.6% the year following hitting an all-time high.
What happened when markets hit new highs, after going more than a year without doing so? Since 1958, the S&P 500 had a positive return 92% of the time, in the 12 months following the all-time high.
Peter Lynch, the legendary former manager of the Fidelity Magellan Fund said, "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”.
It is always a good time to be invested, in the context of a well-crafted investment strategy, that considers the investor’s time horizon, ability and willingness to assume risk.
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