What is one advice you would give someone that just joined StashAway?
Key Takeaways from the video:
- Markets will go up and down; Stick to your long-term plan and don’t overreact to short term volatility or noise.
- Set up a standing instruction or monthly deposit to dollar cost average (link) your investment
As summarised by this article, almost all big stock market gains and drops are concentrated in just a few trading days each year. Missing only a few days can have a dramatic impact on returns.
For example, between 1994 and 2013, just missing the 20 best days of the S&P500 would have eroded 67% of your returns. As the best days and worst days of the market are equally concentrated, timing the market can be a perilous proposition, and may be detrimental to your long term returns.
To put it simply, it is difficult to predict exactly when market sell-offs will start or end; Any strategy which involves predicting the future — whether it's knowing when to jump in and out of the market completely, or knowing which investments are next year's big winners—is unlikely to succeed for very long.
Consistent Investing outperforms Overreacting to Corrections
The chart below shows the performance of various investors through a past market correction.
After the market rallied in Nov 2011, investors who maintained their regular contributions throughout the correction, dollar cost averaging at discounted prices, would have significantly outperformed other investors.
This advantage grew even more pronounced as their returns were compounded over the long term.
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