Saving and Investing: In the long run, discipline breeds success

User Written by Carl Turner on December 11, 2014.

Saving and Investing: In the long run, discipline breeds success

Volatile markets can be extremely daunting and discouraging to potential investors and can even affect the confidence of seasoned professionals, however it is important to remember that markets always move in cycles. Over longer periods the short-term ups and downs of the market are smoothed out so that longer you keep your investments in place, the greater chance you have of a positive return.

This is yet another reason to avoid trying to time the market and instead favour disciplined investment which ignores short-term fluctuations in market prices. Of course it is natural to want to keep an eye on how your investments are progressing in the markets but if you try and use the information to time when to sell you are playing a dangerous game. An industry study has shown that the biggest outflows of monies from mutual funds happen after rather than before a major market fall and vice versa. In other words whilst everyone is aiming to buy low and sell high, in fact the majority are doing the opposite.

For this reason, the best strategy is to decide on a balanced, diversified portfolio and stick with it i.e. to buy and hold. If you’re not convinced, have a look at this table:

Graph - what is the chance of negative returns from investing in global equitiesThis is the images alt description


The data was taken from the MSCI world index over a 32 year period. The graph shows that in any one year of investing there was a 25% chance of a negative return, i.e. your investments falling in value, this percentage decreases over time until after any 12 year period from 1980-2012 the chance of a negative return was 0%. A reassuring fact if your shares have just taken a nosedive!

The last 3 blogs have shown that having a diversified, long term investment strategy while remaining fully invested outweighs timing the markets. Investing consistently and in a disciplined way is a proven route to investment success.

If this is something that you would like to look into, please contact me for a free, no-obligation consultation.

Carl Turner

Carl Turner

Posted on December 11, 2014 in Investments.