Time in the Market

It's time in the market that counts.

In the short-term, returns may vary considerably. This kind of volatility is typical of higher-risk investments such as equities. But, while higher-risk is the price to pay for the potential of good returns, investing for the long-term helps to manage risk and reduce the variability of returns.

Instead of adhering to this sound investment principle, many investors try to time the market. However, a market-timing strategy is difficult, if not impossible, to follow. You have to guess it right, twice!

The problem with switching between asset classes, is that it requires you to be right twice: once when exiting and once when entering any particular asset class. Now, imagine having to time this decision across asset managers, investment styles and currencies!

Given the short-term volatility inherent in equity investments, how can investors structure their portfolios to have the best-of-both worlds: growth and security?

For most investors, the wise approach to investing is an investment plan that builds a diversified portfolio with a mix of equities, bonds, cash and property based on the investor's needs and risk profile.

Essentially, diversification is about structuring your investment in such a way that it includes a spread of assets with different risk profiles.
This would combine a stable element (bonds and cash) with the opportunity to benefit from the historically higher returns of equities. The exact mix should depend on your needs, risk appetite and timelines.

Contact a professional financial adviser to help you structure and maintain a portfolio tailored to meet your needs.