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Investment Strategy

Investing for the longer term

Simon Curtain
Partner/Private Client Adviser
11 May 2018

We hear it all the time; “invest for the long term”. But it’s easier said than done, especially with the constant barrage of news and current affairs we are confronted with every minute of every day.

It is increasingly difficult to see the wood for the trees. As financial advisers we are often asked what the market will do today, tomorrow or next week. The simple fact is that nobody knows what the market will do today or tomorrow.

In fact, it’s anybody’s guess as to whether the market will go up or down on any given day. So don’t try to time markets over the short term.

Returns over time

Some time ago, Dr Shane Oliver, Chief Economist at AMP Capital, produced a graph (below) showing the percentage of positive sharemarket days over varying time periods.

As you can see, there is close to a 50% chance that the market will provide a positive return on a daily basis for Australian and US shares. While returns on a daily basis are almost impossible to predict (50/50), what’s important to note is that the positive bias increases dramatically over longer time periods.

For example, when comparing year on year, the Australian sharemarket has provided positive results over 80% of the time, increasing to 100% when we start talking about decades.

Long term all the way

The key takeaway here is that you shouldn’t get too caught up in day to day movements of the sharemarket, but instead focus on the longer term. Sure, global and local events will shape the day’s result but the chance of picking the market’s reaction is pretty much the same as a toss of the coin.

If you commit to investing for the longer term, and drown out the noise, the bias for positive returns is much stronger.

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.