The battle against market volatility is best combatted with time.
Compounding interest is is frequently underestimated when calculating
the return on cash and fixed interest investments. Consider the table
below. With tow payments in early years, a long term growth
rate of 7.5% generates a million within 23 years.
Besides time, a sound investment strategy employs sound investment
discipline. This means acknowledging mistakes early and adjusting
portfolio composition when trends change.
"More money has been lost anticipating a market crash than actually
during one," according to Peter Lynch, legendary former manager
of the Fidelity Magellen fund. He does not believ in market timing.
According to his calculation, if you bought stocks once a year and
were unlucky enough to pick the worst day to invest (i.e. when stocks
were at their highest prices) 30 years in row, you ended with an annual
return of 10.6%. if you were incredibly lucky and invested on the
best day of the year 30 years in a row, you ended with annual return
of 11.7%. so, the difference between perfect timing and horrendous
timing is 1.1% - not a grand difference.