Vanguard’s 20th annual chart showed that investors who cashed out when equity markets dropped to their lowest in March 2020 would have missed out on the “rapid rebound and continued growth” for the remainder of the year.
Based on the same initial $10,000 investment, investors exiting Australian shares in March 2020 would have been $55,843 worse off than those who stayed invested as at June 2021.
“One of the biggest investment lessons learned from the pandemic is that markets are truly unpredictable, and letting short-term market conditions drive investment decisions is highly risky because it means investors have to get two timing decisions correct: when to exit the market and when to re-enter,” Vanguard’s head of personal investor, Balaji Gopal, said.
“On average, investors can expect to see one major attention-grabbing market downturn event every two years, testing an investor’s mettle to stick to a long-term strategy.
“But in fact, investment returns are largely determined by asset allocation and an investor’s resolve to stick to it, rather than by the timing of a trade. The vast majority of investors who cashed out last year would have fared better on the whole if they had left their portfolios untouched.”
Neil Griffiths
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
