Volatility and short-sightedness (myopia)

Posted by Naomi Rosenthal on Monday, October 18, 2010 Under: Investment

Myopia [mī-ō’pē-ə] noun: Lack of discernment or long-range perspective in thinking or planning.
Volatile [väl′ə-tīl′] adjective: (of prices, values, etc.) tending to fluctuate sharply and regularly.
The biggest investment mistake you can make is not getting started. But a close second is bailing out of the market before your financial plan has a chance to come to fruition.
You zig, when you should have zagged. You jump ship with the intention of getting back in at a later date. But once you’re out of the market, it’s near impossible to get back in. Standing on the sidelines, your optimism becomes riddled with uncertainty. The fear of volatility has you paralysed. You let opportunities slip by because you fear volatility. Here’s why you should embrace it.
The time to invest your money is when it hurts the most. The moment you decide to head for the sidelines is the exact moment you should add more to your investment. It’s important to stay committed to your plan, as to react adversely to volatility is to be distracted from your long term goals.
Volatility flattens over time. Staying focused on your horizon and your long term goals will help you to ignore the short term fluctuations. The following chart* shows what happens with the ups and downs of investment markets over different time horizons.

When it comes to investing, one of your greatest allies is time. It has a moderating effect on markets such as shares and property and the longer you hold an investment, the more likely you are to enjoy market growth.
As dedicated financial advisers, our role is to keep you focused on your financial plans and remind you to zag when you’re trying to zig.

Make the most of your money and contact us today
Phone: 02 9417 6011
Email: info@tudorinvest.com.au

*Vanguard 2008, Plain Talk Library, ‘Realistic Sharemarket Expectations’. Past performance is no indication of future performance. Source: Andex.

In : Investment 


Tags: volatility fear "long term goals" focus "short term fluctuations" "time horizon" 
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