The power of patience: why doing nothing can be the best investment strategy
Chris Broome – Chartered Financial Planner
In the fast-paced world of investing, it’s easy to get caught up in the urge to make constant changes to your portfolio.
However, history has shown us that sometimes, the best course of action is to do nothing at all.
1. Market Volatility
Over the years, the stock market has experienced its fair share of ups and downs.
Think back to the financial crisis of 2008. Those who panicked and made impulsive decisions often ended up losing more than those who stayed the course and weathered the storm.
Fast forward, and the market recovered, rewarding those who held onto their investments.
2. Timing the Market
Trying to time the market is notoriously challenging.
Even the most experienced investors struggle to consistently buy low and sell high.
Consider this: If you missed just a few of the best trading days in the market, your overall returns could be significantly lower.
3. Compounding Returns
One of the most powerful forces in investing is the magic of compounding.
By leaving your investments untouched, you allow your money to grow exponentially over time.
Albert Einstein once called compounding “the eighth wonder of the world,” and for a good reason.
4. Reduced Costs
Frequent trading can lead to higher transaction costs, taxes, and fees, which can eat into your returns.
A long-term, buy-and-hold strategy often results in lower expenses, leaving more of your money to grow.
5. Psychological Benefits
Constantly monitoring and tweaking your investments can be emotionally exhausting.
Taking a more hands-off approach can lead to reduced stress and better decision-making.
Conclusion
So, what’s the takeaway?
While it’s crucial to review your investments periodically and make adjustments as your goals change, there’s a strong case for the “do nothing” strategy.
By staying patient, staying the course, and keeping your long-term goals in mind, you’re likely to come out ahead in the end.
Remember, the journey of investing is a marathon, not a sprint.
Next steps
If you have any questions about any of the above, or wish to discuss your long-term financial plans with us, please get in touch. Contact us
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
