KEEP YOUR EYES ON THE HORIZON

KEEP YOUR EYES ON THE HORIZON

 As geopolitics exerts a bigger influence on markets than perhaps ever before, investors should be prepared for more market uncertainty in 2017.

 It’s natural for investors to be concerned about bouts of short term volatility, but it is an inevitable feature of stock markets. The chart above illustrates the cumulative return on £100,000 over a 20 year period in the FTSE All-Share Index and shows the clear benefit of remaining fully invested over the period.

 The temptation can be to wait on the sidelines, and delay making the investment decisions that are needed to help achieve longer-term financial goals. Of course, the end of the tax year is another reason to make those decisions, as valuable tax-saving opportunities will otherwise be lost.

The reality is that the sharpest falls and largest gains are often concentrated into short periods of time. Investors who try to time the market to avoid the falls are highly likely to miss the gains. As the chart shows, even missing a small number of the best days can have a huge impact in reducing an investor’s total returns. Time in, not timing, is the key to investing.

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