I often talk about time in the market and timing the market. A lot of people do. It would appear to be the only way for our portfolios to survive these turbulent times is to stay put. Do nothing. Timing the market is virtually impossible and relies on luck. Time in the market ensures that your investment portfolio remains intact through the cycles. Nearly every unit trust outperforms its investors as investors generally move in and out of the market too often.
We have seen turbulence before, 2007 and 2001 happened just this century, and there are many examples from the past 50 years. Markets have recovered every time. With the Virus, the markets dropped an average of 34% in late March, then recovered in a very sharp “V” shape almost immediately. I doubt anyone would have the luck to time the selling of growth assets in mid-March and rebuy them all again in April. Some may have got the first leg right, but did they then re-invest it all in April?
What will happen in the future? Even the best crystal balls are cloudy. Will the recovery be “V” shaped? ‘U” shaped? “W” shaped or for the very pessimistic, “L” shaped?
Nobody knows. Our only defense if to have a diversified portfolio of quality assets and to sit tight.
My Friend, Deon Gouws, wrote about this in the Financial Mail last week. Natalie has attached his “View from the Thames” for your reading pleasure. Thanks Deon.