One of the quickest ways to score in football is when a quarterback throws a long pass to his receiver who hauls it in for a touchdown. It’s also a play that works less than once a game for most teams. Why? Because it’s a high-risk play that doesn’t always succeed.
The same applies when it comes to investing. For every high-risk investment that finds pay dirt, many won’t. Chasing returns might get you ahead quickly, but that same strategy over time is prone to fail.
When investing, it’s important to consider your goals and how much time you have to accomplish them without getting bogged down by the day-to-day returns on your investment.
Here’s a good example for anyone who thinks timing the “hot” stock is a good approach: If you invested $1,000 in the S&P 500 in January 1970 and kept it there until December 2012, your initial investment would have grown to $58,768, representing a 9.94 percent annual return. If you missed the 25 best single days, your annualized return would have dropped to 6.33 percent¹
You shouldn’t let a short-term event determine how you invest. Stick to long-term goals when it comes to building assets for your future.
¹ Money. USNews.com 2014. “5 Tips to Improve Your Returns.” This hypothetical investment is for illustrative purposes only and is not intended to represent any particular investment product. Past performance is not a guarantee of future results. The S&P 500 is a capitalization-weighted index of 500 widely traded stocks. Created by Standard & Poor’s, it is considered to represent the performance of the stock market in general. It is not an investment product available for purchase.
For informational purposes only. Should not be construed as legal or investment advice, a promise of benefit or guarantee of investment performance.