The newest edition of our quarterly newsletter, Portfolio Insights, is now available.  Click here to view the newest issue.

As a co-editor of this publication, I usually try to focus readers’ attention towards the articles, but I wanted to mention one of the quotes I chose for this issue.  (For those of you who haven’t seen the newsletter before, each article is accompanied by a quote from a public figure.)

“Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” – Peter Lynch

This is particularly timely given the recent sell-off.  It is very common for investors to panic when markets are falling, but the worst thing you can do is to jump out of the market.  To be successful with this strategy, you have to time the market twice: once when you sell and once when you get back in.  Because it is impossible to accurately time the market’s movements, investors risk missing out on big gains while sitting on the sidelines – and the biggest gains tend to come after the biggest losses.

Missing a few big days of gains may seem unimportant, but consider the table below from Legg Mason using data from FactSet.

This table pretty much speaks for itself.  The impact from missing the biggest daily gains over the past 20 years greatly decreased returns.

Although short-term market fluctuations can be unnerving, the likelihood of realizing a loss has historically decreased over longer holding periods.  Economic growth for the next few years is likely to be very uneven, which means market pullbacks should be expected.  Just remember to be patient and take a long-term view.

Thanks for reading,

Peter Lazaroff, Investment Analyst

St. Louis, MO

www.acrinv.com