It’s only natural for someone invested in a poorly performing active equity mutual fund to wonder if it’s time to make a change. Should an investor sell a fund if it trails its benchmark for a year? Three years? Five years?
Investment time horizon is a critical concept in building wealth. Most investors have very long investment time horizons, typically decades or more. Investment managers also require long time horizons to deliver on their investment thesis.
Even though we all know market fluctuations are a normal part of equity investing, large market declines can be scary because they often happen rapidly and feel random.
We are experiencing a new peak in the rhetoric around trade, geo-politics, the economy and the business cycle. We have also seen increased market volatility. It can be hard to know when to be concerned and when to tune out the noise. Having a consistent framework for viewing markets with a long-term perspective can be a valuable tool to help avoid costly behavioral mistakes. While there may be a heightened sense of fear in the headlines, based on our Market View, there is no reason to sound the alarm.