Why Time Matters in Investing
Don’t you love the cheesy, old-couple-walking-along-the-beach shots you see in the ads for many retirement funds? They are sweet, and they look so happy, but they make me think fondly of my grandparents – not about revving up my retirement savings.
I love when new customers tweet us excitedly: “My @Betterment account has already doubled the returns I was seeing in my savings account!”… but I try to remind them that the timing is too short to give any real indication of the account’s performance (I know, I know. What a drag).
I can’t say it enough –
Time is incredibly important in investing.
Last week, Matt Krantz from USA Today wrote about a common investing conundrum: why did a certain company’s stock price fall, even though it reported stronger earnings than anticipated? This is surprisingly common, because there are many factors influencing price in the short-term.
Investor sentiment (and subsequent actions) plays a huge role in shifting stock prices. Company announcements, economic data, earnings estimates, inflation, exchange rates, world events, and hype around a hot company are all factors that can drive a stock up or down.
A company’s earnings, growth and cash flow will ultimately guide its stock price, but it’s important to remember the influence of external factors. Stalking the stock market can be fun, but set-and-forget is a much better approach for gaining long-term returns.
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