Time, not timing

Columbia Management, Investment Team | November 26, 2013

  • Historically, some of the worst short-term market fluctuations and losses were followed by periods of substantial market recovery.
  • Investors who try to time market swings often end up missing out on the market’s best days.
  • Asset allocation, diversification and periodic rebalancing are tools investors can use to help weather market downturns.

Sometimes the best selling strategy for investors may simply be — don’t. Focus on buy and hold for the long term.

Over the past several decades the market has endured: the Iranian hostage crisis, a Savings & Loan collapse, the stock market crash of 1987, the fall of the dotcom stocks, an attack on the United States, two wars and a credit crisis. Investors often make the mistake of trying to time the market by simply selling out of it. But historically, some of the worst short-term market fluctuations and losses were followed by periods of substantial market recovery.

The chart below illustrates how missing even a few of the market’s best days can significantly affect your rate of return. Asset allocation, diversification and periodic rebalancing are tools investors can use to help weather market downturns. Of course, having the right investment mix doesn’t mean that the value of your portfolio holdings will never go down, but rather it helps your portfolio strike the right balance between risk and reward.

Remember, it's time invested in the market -- not market timing

You should consider your goals, time horizon, risk tolerance and overall financial situation when making an investment or asset allocation decision. Keep in mind that diversification and asset allocation do not assure a profit or protect against loss.

Past performance does not guarantee future results. Sources: Columbia Management Investment Advisers, LLC and Ned Davis Research, Inc., 12/30/1981-12/30/2013. Copyright 2013 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

It is not possible to invest directly in an index.

The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization U.S. stocks.