As you start your investing journey with us, you might be trying to understand your returns. So, we wanted to take a moment to explain a couple of things about investment returns.
Successful investing takes patience
You may recall that at the end of 2018, the S&P 500 recorded the worst 3-month return since 2011; then, at the beginning of 2019, the S&P 500 went on to record the best first quarter since 2009. These swings, though normally not so drastic, are part of being invested in the markets. We saw some clients withdraw their funds because they were nervous about the 2018 dip. But then they missed out on the huge rally only a month later! So, stay calm and be patient through the ups and downs, because the only way to confidently capture the best returns of the markets is by enduring the inevitable short-term ups and downs, and everything in between. Although the markets can look flat or volatile in the short term, history tells us that in the long term, markets naturally trend upward.
Successful investing takes consistency
Even if the media make it sound like a particular moment is a good time to invest, no one actually knows what will happen the next day, week, or month. Remember, headlines sell newspapers; they don’t give investment advice. Even though the markets naturally trend upward, a single one-time deposit is exposed to short-term market behaviour. So instead of making a one-time investment and hoping for magically high returns, invest consistently, regardless of what is happening in the markets. This way, you buy when the markets are up, and sometimes when they are down, and your portfolio can ride the market’s reliable long-term upward trajectory.
In the short term, volatility is a normal part of investing.
So, what should you do in the early stages of an investment?
Be patient.
Maintain a long-term perspective when you’re looking at your returns.
Keep in mind that in the short term, any investor (professional or amateur) could face negative or volatile returns.
Long-term investments will benefit from time in the market.
Something as simple as a monthly deposit plan, even through the good times, bad times, and uncertain times, can help reduce your portfolio’s fluctuations over the long term.
So, don’t be discouraged if the returns are not what you are hoping for in your first few months. Just remember that successful investing requires maintaining both a long-term perspective and consistent investing plan.
