Chart of the week: don’t try to time the market

published 24 February 2017

Over the very long term, returns should be high if starting valuations are low: valuations tend to revert to the mean. Second-guessing short-term market movements, however, "is a mug's game", says the FT's Hugo Greenhalgh. Don't get panicked by a sudden dip and sell out in the hope of returning when things improve. Markets' default direction is up, and they can bounce back very quickly after a slump. If you had missed the FTSE All-Share's best 30 days in the past two decades, your portfolio would have lost money over the period. But if you had just sat tight, your initial stake would have tripled.

Viewpoint

"Interest rates are going to stay low this year and most likely for the rest of the decade wage rises are stuck in first gear [due to] increased labour costs from the new apprenticeship levy and the rollout of the Nest occupational pension to small employers Exhibit two is the lack of business investment ultra-low interest rates [have] failed to persuade companies to prioritise investment above handing out profits to shareholders In the last year households have also borrowed heavily and run down their savings In short, there is very little left in the tank of the private sector or the government to boost a flagging economy, let alone overheat it."

Phillip Inman, The Observer