Paul's Insights: Shares hit new highs but time not timing matters

The Australian share market has notched up an all-time high with the ASX 200 benchmark index hitting 6,875.5 points in late July, passing the previous record of 6851.5 points reached in 2007.

It’s great news for investors – and that includes the millions of Australians who have at least part of their super invested in Aussie shares.

The latest share market high will inevitably see some people wondering if now is the right time to cash in their shares. Others will be sitting on the sidelines, waiting for the market to fall before diving in.

It’s always tempting to try and buy when the market is at a low point, and sell when it reaches a high point. You don’t have to be Einstein to see that anyone who can consistently pick this timing will end up very rich.

The problem is that while some investors get it right occasionally, consistently hitting the timing sweet spot is a pipedream for most.

That’s because no one can say for sure how the market will move over the short term. The price of investments especially shares, can be affected by a huge array of factors including economic, political and social influences, and markets have an unnerving habit of moving in sudden jolts in reaction to unpredictable causes.

That’s why it doesn’t pay to try to time your entry into or out of the share market in the hope of a short term win.  As legendary US fund manager Peter Lynch once pointed out, “More money has been lost by investors waiting for corrections than in corrections themselves.”

The way to win with shares is to hang on for the long term. There’s a lot of truth to the expression ‘it’s time in the market that counts, not market timing’.

There’s no denying the share market has its bad days, weeks, and even years. And anyone who has invested just as the market has gone into a tailspin can really hurt at the time. As we’ve seen in recent days though, the market has never failed to recover and go on to new heights, and there’s no reason to believe this pattern will change in the foreseeable future

It’s a compelling argument for long term market involvement and a rejection of short term plays.  Stay invested with the right blend of asset classes for your investment goals, and let the market take care of the rest.


Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.


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