STREET DOGS: Investment and time
The damage that market declines inflict on a portfolio is all too real
One of the biggest problems with "buy and hold" investment advice is the "duration mismatch". This occurs when individuals do not necessarily have the "time" to achieve the long-term average returns of the market. Most have been led to believe that investing in the financial markets is their only option for retiring. Unfortunately, they have fallen into the same trap as most pension funds, which is hoping market performance will make up for a "savings" shortfall. However, the real-world damage that market declines inflict on investors and pension funds, hoping to garner annualised 8% returns to make up for that lack of savings, is all too real and virtually impossible to recover from. When investors lose money, they can regain the lost principal given enough time, but what can never be recovered is "time" lost. "Time" is finite and probably the most precious commodity you have. And, in the end – yes, emotional decision making is bad for your portfolio in the long run. Unfortunately,...
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