Daniel Orfin & Associates Discusses Importance of Timing for Finances
As an investor in the market, you are vulnerable to falling into one of two documented traps: withdrawing your funds after a marginal victory, or, when an unfortunate setback occurs, you cut your losses and sell off your shares. Each choice is ill-advised because the stock market revolves around longevity; the cooler heads, who leave their investments in place for an extended period of time, are the ones who most commonly prevail.
Another stock market mistake is attempting to surmise when the market is ripe for the picking and then acting on said instinct. Daniel Orfin & Associates, a group of financial gurus residing in Troy, Michigan, has graciously explained why you should not press the panic button, but rather you should opt to let your investments accrue returns over time.
Statistics Do Not Lie
The S&P 500, a stock market index that highlights the stock performance of 500 giant companies listed on stock exchanges within the United States, typically assures a 10 percent return annually, without dividends considered. It is worth noting that investing in the S&P 500 and leaving it for a year does not guarantee a 10 percent return on investment, instead you must remain in the market to attain such returns.
Daniel Orfin & Associates notes that the market rewarded those who stayed committed with a 9.9 percent annual return in the 15-year span that passed 2017. The timing of withdrawal from the market is critical as losing out on the ten best days in that period by exiting the market prematurely caused annual returns to drop to 5 percent. Sitting on the sidelines for the best 20 days of that period resulted in annual returns reaching only 2 percent. Furthermore, missing the 30 best days resulted in forfeiting money as your annual return was -0.4 percent. Volatility is an unavoidable aspect of the market and, by getting involved earlier, you will gain experience in handling the daily fluctuations and allow yourself more time to build healthy returns.
Greed can also be problematic, as you try to outsmart the market and show how clever you are. Typically, it only backfires, so take the tried and tested approach, which is investing for the long haul and giving the market ample time.
Analyze the Past
From 1969 to 2015, the average annual return of the MSCI World Index was 11 percent and, unsurprisingly, 2008 experienced the most massive loss to the tune of -40 percent. Out of those 46 years, 32 concluded with gains, with 1986 seeing a record 43 percent in the positive. While any year can produce dramatic rises and dips, the returns have a tendency to even out if you are patient. Daniel Orfin & Associates does not suggest equities for timeframes under five years because of the looming threat of volatility. Statistics show that following 15 years, your interest will match your total contributions and, going even further, a 23-year commitment will see your interest double the wealth attained from contributions. At 30 years, interest will amount to three times as much as the wealth of contributions and 45 years will elevate it to nine times the total. Daniel Orfin & Associates states that a long-term investment strategy is bound to greatly improve your odds of seeing a satisfactory return.
