Don't just tell, show clients the pitfalls of market timing

It’s easy to persuade clients to stay invested when the stock market is enjoying a long winning streak. As long as clients see their portfolio account balance is growing, the temptation to sell investments en masse is likely to be low. But let the market show signs of trouble, and it can be a different story. The understandably human response, to worry, might goad them into retreating to cash at precisely the wrong moment.

What they may not realize is that the market’s worst and best days are typically clustered closely together. Lacking a crystal ball to determine exactly when those days will be, investors who try to time the market (by selling when they think the market is in decline) risk potentially missing out during a comeback.

Use the downloadable PDF Navigating the best and worst days of the stock market to communicate that to your clients in two ways:

·      Visually: This client-approved one-pager uses charts of historical index data to visually explain why successful market timing is so difficult.

·      Auditorily: By enabling multimedia on the Adobe Acrobat Reader, you and your clients can also listen to an audio summary by behavioral coaching expert Michael DiJoseph, CFA, and senior investment product strategy manager with Vanguard Investment Advisory Research Center.

Find more content like this to share with clients: Bookmark our Client Resources Hub and visit regularly to access our expanding library of client-approved materials.

Notes

All investing is subject to risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss.

Past performance is no guarantee of future returns.