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A calm head will prevail

With the horrible events unfolding in eastern Europe right now, it falls to us to try to put this into some perspective, particularly for those who are new to investing or have entered their investing journey recently.
By · 24 Feb 2022
By ·
24 Feb 2022 · 5 min read
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How the events in Ukraine play out is not for us to speculate, nor is it for us to try to counter with quick reactions because this event will, in time, pass.

Time is the keyword here – the old adage ‘time heals all’ is a cornerstone of investing. Time gives you that ability to transcend event shocks, even like the one we are seeing now. Think about the recoveries post the first global pandemic in 100 years, the Global Finance Crisis and all the other events that have impacted investment markets since creation.

Here is the best way we can explain why time will heal all. Below is a chart of the ‘unluckiest investor’ leading into the Global Financial Crisis. This investor invested in the market at the very top on 1 November 2007. Their investment then fell 55 per cent in the next nine months.

However, if that investor stuck to their investing principles of reinvesting their dividends (total returns) and staying in the market for the long term, by 2013, they would have had recouped everything. If they continued on reinvesting until the market returned to the level reached on 1 November 2007 – that unlucky investor would have gained 72.3 per cent.

In the words of Howard Marks -"Why sell something you think has a positive long-term future to prepare for a dip you expect to be temporary?"

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Not only that, if that unlucky investor had consistently added to their portfolio, they would have recouped their initial investment even faster. Moreover, they would have an even greater gain due to better average pricing and a largest capital base giving them greater dividends to reinvest.

We understand that right now is a troubling time – but time will show that this is just another event your investment will weather.

Here are some additional articles about how to deal with market volatility and geopolitical events that affect your investments.

Links

Buying when you feel like selling

How to worry better

How to manage market volatility

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