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The basics of Investing: Timing - Big Sky Financial Solutions

The basics of investing: Timing



To be a successful investor, you need to be patient. You need a long-term view, clear goals and some good financial advice. That way, you’re more likely to make sound decisions, not impulsive ones.

This is the third in our new series of articles about the investment basics, those key principles you should understand - and follow – if you want to be a successful investor.

In our previous article we talked about the ‘miracle’ of compounding - how you can grow your investment dramatically by reinvesting your interest and dividends. To take full advantage of compounding you need time. This article is all about timing.

Investing is a bit like wine. The longer you can put your money ‘down’ the better it ages. And you generally get a better experience when it’s time to ‘open’ it too!

The hard part for investors – and indeed some wine collectors - is leaving it alone for long enough to enjoy the full benefit of its maturity.

Part of the reason for some people’s inability to follow this discipline is market distraction. People get spooked by sudden movements in the stock market, especially downward ones. They forget that markets are fluid. They go up and they come down. If they go up for a long time you can usually expect them to have what’s called a ‘correction’ and that they will come down as well. It’s all part of the cycle.

Over time, markets like the Australian equities market have generally moved upward. There will always be corrections, but historically the overall trend is up.

Time in the market not timing the market



If you’re trying to pick the best time to enter into, or exit from an investment, we hope you have a crystal ball! It is difficult to achieve this consistently as there are too many external, uncontrollable factors that can affect markets.

That’s why it’s time in the market not timing the market that matters. By taking a long-term view of investing, you can ride out any short-term market fluctuations and take advantage of potential long-term growth.



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