Published March 6, 2020
This month I have received more than the usual amount of correspondence asking where my column is. It is flattering to know that people care, but pity the poor columnist in a market of volatility and government by tweet. Sometimes circumstances change so rapidly, I can’t keep up with the changes. But should you care about the volatility anyway?
Investors are people, and people are often impatient. No one likes to wait in line or wait longer than necessary for something – especially today, when so much is just a click or two away.
This impatience also manifests itself in the financial markets. When stocks slip, for example, some investors grow uneasy. Their impulse is to sell, get out, and perhaps get back in later. If they give in to that impulse, they may pay a steep price.
Across 30 years through Dec. 31, 2018, the Standard & Poor’s 500 posted an average annual return of 10 percent. During the same period, the average mutual fund stock investor realized a yearly return of just 4.1 percent. Why the difference? It could partly stem from impatience.
It’s important to remember that past performance does not guarantee future results. The return and principal value of stocks will fluctuate over time, as market conditions change. And shares, when sold, may be worth more or less than their original cost.
Investors can worry too much. In the long run, an investor who glances at a portfolio once per quarter may end up making more progress toward his or her goals than one who anxiously pores over financial websites each day.
Too many investors make quick, emotional moves when the market dips. Logic may […]