Game shows how buying and holding works

If you ever need to illustrate why market timing is a difficult way to beat markets, a simple – and addictive — game by news site Quartz will drive the point home.

In the game, your client will start with $10,000 invested in the S&P 500. All she has to do is decide when sell and when to buy, over a random 10-year span of actual index performance. At the end of the game, if she beats the market, she wins.

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Quartz notes that since 1978, there have only been 126 weeks where a portfolio matching the S&P 500 closed lower 10 years later. You may want to remind your clients of that if they panicked over this week’s correction. You could also tell them that (as Quartz points out) buying and holding the S&P 500 produces an average annual return of 7%, after inflation.

Play the game here.

Also read:

What do clients really want?

Timing volatility doesn’t work

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.