The fallacy of market timing

To earn a decent return, you need to include risky assets such as stocks in your portfolio. Equally important, you have to hold onto those stocks in both good times and bad. That may be hard to do when it seems the stock market is getting overheated - and harder yet just after it has crashed - but in the long run, you will almost certainly be further ahead. Deep down, though, most of us do not really believe that. It is hard to put all our faith in the stock market when memories of the 2008-09 financial crisis are still fresh. In that two-year period, investors worldwide incurred the biggest losses since the Great Depression. And let’s not forget the dot-com bubble. When the bubble burst in March, 2000, it wasn’t only the shares of highflying dot-com companies that plunged, the broad-based S&P 500 index fell from over 1,500 to 800.

Read more on the Globe and Mail.

Article by Fred Vettese, chief actuary of Morneau Shepell.