| Fiction | Facts |
|---|---|
| The timing of your annual savings investment is of utmost importance for the well-being of your portfolio in the long run. | The timing of your annual savings investment will make a difference in the long run, but it is far from being the critical factor many seem to believe. Case in point: consider an investor blessed with the power of perfect market timing (blue line) compared to another investor cursed with systematically picking the worst possible day to invest each year, over 30 years (red line). In the end, the market timing champion would have outperformed the most unfortunate of all investors by a mild 1% / year. If we take the more realistic example of an investor saving systematically at the beginning of each month, this annual outperformance shrinks below 1%. How is such a small gap possible? Simply because in the long run, the first year's return is superfluous. What truly matters is the frequency of savings and passage of time, not market timing. |
| Selling in times of heightened uncertainty can protect investments from heavy losses. | Selling in times of heightened uncertainty is generally the best way to ensure heavy losses, as it often rhymes with selling low and missing the rebound. More importantly, one should keep in mind that the only certainty is that there will always be uncertainty, as it is the price to pay for capital appreciation in the long run. And – need we add – it isn’t in the media’s best interest to report the latest news with nuance and historical perspective; better to let fear and pessimism easily set in. However, the chart on the right should act as a reminder that letting emotions take over is a good recipe for short-term gain, but long-term pain. |
| The political party of the government in power has a significant impact on equity market returns. | Over the very long term, history shows that stock markets have been successful in continuing their upward trend regardless of which political party is in power. Over the past 50 years, an investor who had decided to stay on the sidelines when the President was not of his political stripe would find himself (badly) trailing an investor who decided to always stay invested. In the end, history shows that investors benefit from not letting politics and investments mix, as difficult as that may be at times! |
Facts & Fiction
Updated on February 28, 2025
Fact-checking and perspective on common investment beliefs.
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