Important Links

Time in the Market vs Timing the Market

10 December 2018HighlightsEconomics
Portfolio Diversification can help fight bad times in the Market - Market Insights by Citibank UK

Given the increase in price volatility, investors may think that market timing during a late-stage bull market may sound like a good idea but history suggests that there is no 'right time' to try timing markets.

Timing the market may cost you to miss out: Figure 1 compares the annualized returns from staying fully invested in the S&P 500 over three consecutive ten-year periods. It also shows the scenarios of being invested but somehow managing to avoid the market's ten worst days, and also missing its ten best days during those periods. From 1988 to 1997, the annualized return on an investment in the S&P 500 would have risen from 17.6% to 22.8% by avoiding the ten worst days. By contrast, missing out on the market's ten best days would have resulted in an annualized return of 13.9%. The experience would have been even worse by missing the market's ten best days in each of the next two decades.

Clearly, avoiding the market's worst days would have led to much higher returns. However, it turns out that the best days and the worst days are typically clustered in the same periods. In other words, you'd have had to have been entering and exiting the market with pinpoint accuracy and high frequency. Without perfect foresight, the probability of being able to achieve this is practically zero.

How missing the Markets Best and Worst Days can impact your Investment Portfolio - Market Insights by Citibank UK

Investment Portfolio Diversification is the Key: Many investors who sell during market downturns simply monetize their paper losses and often miss buying opportunities and improved investment performance when the market recovers. Citi analysts believe the key is to have a well-diversified investment portfolio that can weather through market declines and yet capture the performance in a market upcycle.

Keep a Long Term Perspective: Markets tend to be more volatile in the late cycle of bull market. It is important to keep a long term perspective and not allow short term market noise to derail investors' long term investment plans

Our recent research

Is the Market Rebound a Pivot?

After falling 7.6% in 4Q18, global equities rebounded by 4.6% YTD as of 17 January 2019. The S&P 500's close at 2,636 on 17 January 2019 also represents a rebound of 12% from its low made on 24 December 2018, a sharp recovery achieved in just 16 trading days.

Find out more

Equities

Downgrades to EPS – A Cause for Concern?

Downgrades to consensus analyst Earnings-Per-Share (EPS) forecasts have accelerated but Citi analysts believe that downgrades are not always fatal.

Find out more

Equities

Increased Likelihood of a Softer, Later Brexit

On 15th January, the UK House of Commons rejected PM May's Brexit withdrawal agreement by 432 votes to 202, the heaviest parliamentary defeat for a British government. However, the government survived Wednesday's no-confidence vote, thereby avoiding a potential general election, which would further heighten UK political risks.

Find out more

PoliticsEconomicsUK

Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.