Staying the Course

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Investors tend to see short-term volatility as the enemy. Volatility may lead many investors to move money out of the market and “sit on the sidelines” until things “calm down.” Although this approach may appear to solve one problem, it creates several others: 

1. When do you get back in? You must make two correct decisions back-to-back; when to get out and when to get back in.
2. By going to the sidelines you may bemissing a potential rebound. This is not historically unprecedented; see chart .
3. By going to the sidelines you could be not only missing a potential rebound, but all the potential growth on that money going forward