Investing Basics

The Importance of Time

The financial crisis we are in now is painfully reminding us that volatility can have devastating effects on returns.

While we cannot hide from volatility, there is something we can do.
Our decision concerning how long to invest is critical in determining how we will be affected by volatility.  The longer our investment time horizon, the more likely it is that good years will balance out bad years and our return will come closer to the long-term average that we expect.

So, while the passage of time does not eliminate the relationship between volatility and return, it does lower the impact of volatility.

Together, your tolerance for volatility and your time horizon are what determine the right mix of stocks and bonds in your portfolio.

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