Investing in the moment

Markets around the world have certainly been volatile of late. Market pundits will always have a reason to exploit short-term fluctuations, whether they are from the unrest in Ukraine, reactions to Fed chairman Janet Yellen’s comments, or high-frequency trading. We live in a world where news is sliced, diced, and recycled in nanoseconds. As investors, you have to look beyond the daily, monthly, and even yearly gyrations and focus on your goals and what the time frame for them is.

While living in the moment may be a positive way to live, investing for the moment is not. I’m attaching a piece from Morningstar that discusses coping with near-term fluctuations.

Morningstar Investment Services

Short-Term Focus: Coping with Near-Term Fluctuations

Probability of losing money in the market 1994–2013

50%	Probability
	46%
40
		35%
			31%
30
20				20%
10
0	Daily	Monthly	Quarterly	Annually

Source: Stocks are represented by the Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock

market in general. An investment cannot be made directly in an index. Returns and principal invested in stocks are not guaranteed. Probability of loss is calculated as the number of negative periods divided by the number of total periods using the specified frequency of data.

Instant access to real-time quotes and media reports can make it difficult for investors with a long-term investment horizon

to stay focused on their goals. In reality, these daily market movements may not be as extreme as they seem. As investors

look longer term, their perception often changes. Short-term market fluctuations can be quite volatile, and the probability of

realizing a loss within  any given day is high. However, the likelihood of realizing a loss has historically decreased over

longer holding periods.

The image illustrates that while the probability of losing money on a daily basis over the past 20 years was 46%, the

probability dropped dramatically when analyzing an annual time period—20%.  Periodic review of an investment portfolio is necessary, but investors shouldn’t let short-term swings affect their view of the future.

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