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“It’s time in the market, not market timing, that counts”Dividend investing is not a one month process. In fact, I don’t think it is even a one year process. Successful dividend investing is all about learning to determine a distinct course of action based on sound principles, and then having the patience and fortitude to let your plan work. Sometimes this patience is required for periods of 10+ years or more.
An article on a page from RBC Investments had a good illustration of the need for patience. In essence, your greatest ally in investment is time and they attempt to prove this by providing the following data for consideration:
Here are the results after investing over a 10 year period on the S&P:
staying invested – earned 8.8%
missed 10 best trading days – earned 4.7%
missed 20 best days – earned 1.4%
missed 50 best days – lost 5.6%
In other words, having the patience to stick with your plan, and not jumping in and out of your investments depending on what the flavor of the day is will pay off. Controlling your emotions is crucial so as to not panic and sell when things are at their worst. Staying invested during these times will prove to be more beneficial than trying to time the market.
(Photo Credit: Patti Gray)
This statistic is notoriously known but it is interesting that it is also valid the other way around: missing the worst trading days is also quite beneficial to the investment return. Mebane Faber over at worldbeta.blogspot.com has written about this not long ago. I’m not sure about this but I think than he has also written that the best days often happen relatively closely to the worst days. I’m just not sure what is the morale of these data though 🙂 (Other than that you are reasonably well off by staying fully invested regardless of what the market is doing.)
Hi,
I just wrote about the patience that it takes to be a dividend investor right now as well. I referenced an interesting articly by John Heinzl of the Globe and Mail.
Patience is truly a virtue – plan your work and work your plan!
Your blog is interesting!
Keep up the good work!