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In recent times, markets have seen levels of volatility which may have caused some investors to shy away from investing, potentially putting their long-term financial goals at risk.
But, just as investors can be slow to recognise a retreating market, many also fail to see an upward trend in the market until it's too late - when they've missed an opportunity for gain. Missed opportunities like these can take a bite out of an investor's returns.
Please remember, the value of investments can go down as well as up and you may get back less than you originally invested.
- Because many investment decisions are based on emotion, people may be prone to make irrational decisions during volatile markets. For example, many investors think they can predict losses, which is almost impossible. In effect, what these investors are trying to do is avoid the worst days, but in the process they may also be missing out on the best days.
- The table below is an example of what might have happened if an investor tried to jump in and out of the markets to avoid potential losses, but missed the best 10, 20, 30 or 40 trading days over a ten year period ending 31 December 2013.
Past performance is no guarantee of future performance. An index is unmanaged and one cannot invest directly in an index.
|Period of Investment||Global Bonds||Global Equities||Emerging Market Equities|
|Stayed fully invested||57.32%||107.17%||197.41%|
|Miss the 10 best days||35.62%||16.84%||51.57%|
|Miss the 20 best days||22.97%||-16.98%||1.55%|
|Miss the 30 best days||12.56%||-37.63%||-27.77%|
|Miss the 40 best days||3.56%||-51.78%||-47.26%|
Cumulative Return of Global Bonds as represented by the Barclays Capital Multiverse Index, Global Equities by the MSCI World Index and Emerging Market Equities by the MSCI Emerging Markets Index. Performance in USD for the ten years to 31/12/13.
Living With Volatility's Downside
It can be difficult for your clients to take a long-term perspective during volatile markets with daily injections of bad news. If they develop the ability to keep their focus on the long-term, they'll have mastered the primary approach to living with volatility's downside.
Franklin Templeton Investments has a range of funds which take a long term view, leveraging disciplined, time-tested strategies and assessing risk as rigorously as they seek reward.
This document is intended to be of general interest only and does not constitute professional investment advice. Franklin Templeton Investments shall not be liable to any user of this document or to any other person or entity for the inaccuracy of information or any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission.
The value of shares and income from them may fall as well as rise and investors may not get back the full amount invested. Indices are unmanaged and you can not invest directly in an index. Past performance is not a guide to future performance.
Sources: Franklin Templeton Investments and Morningstar as at 31/12/13. © Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. All MSCI data is provided “as is.” The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited.
Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: Cannon Place, 78 Cannon Street, London, EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority and are authorised to conduct investment business in Denmark by the Finanstilsynet, in Sweden by the Finansinspektionen, in Norway with Kredittilsynet, and in Finland with Rahoitustarkastuksen