Time is Everything When it Comes to Investments

With all the daily media attention on the volatility of the financial markets, it’s easy to lose sight of our long-term financial goals and the advantages of longer-term investing. While short-term volatility can challenge our emotions, it’s important to know that downturns are a normal part of market cycles, and short-term reactions can affect our longer-term performance.

According to Jim Badge, president of DFCU Financial Partners*, the personal investment division of DFCU Financial, we need to not pay so much attention to the daily ups and downs of the markets and let time be on our side. Here are a few points he suggests investors keep in mind:

In most case, time in the market– not short-term market timing – is what’s important. The longer an investor holds stocks, the potential for an overall positive return is often greater. Consider the following: Over the years from Dec. 31, 1926 to Dec. 31, 2006, if you were to have invested in the S & P 500 stock index for each one-year period, you would have received a positive return 71% of the time, 57 up years and 23 down years. But if you had increased your holding period to 5 years, you would have received a positive return 87% of the time. There were 66 rolling five-year periods that were up and 10 rolling five-year periods that were down. And for 10-year holding periods, stocks were up 98% of the time, with 70 up periods and 1 down period.**

Make sure your portfolio is diversified. Investing your funds over multiple stocks or mutual funds and across different asset classes, can decrease the risk to your total holdings if a significant drop occurs in any one of your investments alone. Allocating a portion of your investments to stocks, some to bonds and some to savings or money market investments, can help diversify a portfolio for long-term performance, but maintain liquidity for short-term needs.

Find a trusted professional advisor. A good investment process starts with a trusted, experienced investment professional. Their job is to help structure a portfolio that is designed to meet your goals. Good investment professionals will work with you to assess your current financial situation and help determine your needs, goals and risk level. They are there to help keep a proper perspective and take some of the unnecessary emotion out of the investment process, especially during volatile times.

For more information about investing, feel free to call one of the Financial Consultants at DFCU Financial Partners. Our Financial Consultants have years of experience in the field and all are Chartered Retirement Planning Counselors through the College for Financial Planning.

*DFCU Financial Partners, a division of DFCU Financial, provides securities and investment services through it's broker-dealer CUSO Financial Services, L.P. (CFS). Investment products and services are not insured by the FDIC, NCUA, NCUSIF, or any agency of the U.S. Government; are not a deposit or other obligation of, or guaranteed by, the depository institution; are subject to investment risks, including loss of principle amount invested. Financial Consultants are employees of DFCU Financial Partners and registered through CFS. Financial Consultants do not offer tax advice and are not tax professionals. For specific tax information, contact your tax advisor. DFCU Financial Partners is affiliated with CFS (member FINRA and SIPC).

** Source: Wiesenberger 1/07. Assumes reinvestment of income and no transaction cost.