Buy low sell high, repeat
It has been said that markets are driven by fear and greed - at least in the short-term. Keeping a cool head when the market performs poorly is still one of the most difficult lessons to apply.
When you buy, can have a distinct impact on the kind of returns investors can expect. Unfortunately, research has shown time and again that investors often get it wrong.
They often buy when markets are at a high and sell when markets are low (ask anyone who remembers the dot.com bubble).
Market downturn equals big sale
Ironically, while many investors disinvest from equity markets during times of poor market performance, market downturns can represent excellent buying opportunities - if you have a long-term view.
It is one of the great contradictions that while people generally flock to sales, a stock market "sale" or downturn (i.e. when share prices are low) tends to send investors running for cover instead of running to snap up the bargains on offer.
The few who continue buying on a regular basis throughout market downturns, are actually following one of the oldest and wisest investment principles: buying low and selling high.
Trying to time the market is therefore a futile and potentially costly exercise. Added to this, is the problem that last year's winner is unlikely to be next year's winner. If you are in the market with the aim of building your long-term wealth, it is better to disregard short-term performance fluctuations and to focus on your long-term goals.
Provided that your fund selection is suited to your risk profile and investment needs, following a steady investment approach is likely to serve you better in the long run.
Contact a professional financial adviser to help you structure and maintain a portfolio tailored to meet your needs.