The prospect of military action in Syria has prompted some market instability.
This makes for the perfect lead into a misunderstood form of risk – market timing risk.
Everyone has their theories on where the economy is heading and in turn, where the markets are heading.
Many people assume this is what investing is – knowing what happens next and getting in before prices rise and getting out before prices fall.
Novice investors (and even seasoned ones) make this their focus, believing they should look to time an entry and exit from investments with some precision.
Yet when it comes to timing, most investors (professionals included) are as precise as a service station watch.
The reason being, events like Syria come out of the blue and play havoc with best laid plans.
Further, the impact random events have on investors’ emotions push them to behave in the exact way they shouldn’t – sell when things look bad, and buy when things look good.
Something that goes against their theory of timing the market, given you’d prefer to buy when prices have been pushed down, yet that’s the exact time investors are usually too fearful to enter.
At the beginning of last year many investors were telling their financial advisers where markets were heading and why they’d be staying in cash despite being advised otherwise.
Their decisions were based on media predictions of GFC 2 and other financial tsunamis ahead, so they planned to ride out the storm until things improved.
Things improved quickly – from then until July 31 this year Australian shares were up 18.5% and international shares 30.1%.
Which shows you can never pick a good time to enter or exit the market; Syria can happen or against all predictions the markets can go on a tear upwards.
A goal, discipline, regular contributions and realistic timeframe will always be your best investing weapons.
The right entry or exit will be based around those factors.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. Searching for the top financial adviser in Australia?
