I was at an investment seminar last week. When you fill a room full of advisors and fund managers, it doesn’t take long for people to start talking about the recent market volatility. Some there were saying they were getting phone calls from clients worried about their investments.
So how bad was this crash? Well, from 08 September to 16 October, the MSCI World Index fell by -8.04%. But from 16 October to 29 October, the MSCI World Index has grown by 4.81%. If you had invested €1,000 on 08 September, it would be worth €964. That’s just six weeks of investing.
While people were talking about worried clients, I asked myself:
1. Why are clients invested in a portfolio that they start getting worried over ups and downs over a few weeks? Isn’t this was equity markets do? They don’t go in a straight line like we’d like them to.
2. Why the need to look at markets all the time?
Those who look at their portfolios on a monthly basis, will only see it rising 32% of the time. Someone who only looks at it once a year, sees the exact same portfolio rising 64% of the time. One thinks his portfolio is rubbish and worries about it constantly, the other thinks it’s great as it is rising most of the time.
Investing is a long term strategy to increase your wealth. There will be ups and downs during that time. That is why it is so important to get it right at the outset. Understand the potential downside to any investment strategy and pick one that you are comfortable with.
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