Why Staying Invested Still Wins: A Long Term Investor’s Guide to Market Noise
Over recent months there has been increased talk in the media about markets being “overvalued” and due for a correction. It is natural for investors to wonder whether now might be the time to step back and wait for things to cool off.
The challenge is that headlines are designed to grab attention, not to help investors make good decisions. If we look back over the past 20 to 30 years, markets have weathered the GFC, Brexit, Covid, wars, inflation, rising interest rates and more. Through all of that, long term investors have continued to come out ahead.
Here are a few reasons why.
Pullbacks are normal
On average, global sharemarkets experience a 10 percent correction roughly every year. Volatility is not a sign that something is broken. It is a normal part of the journey toward long term returns.
The key is to remain focused on where you want to be in 10 to 20 years, not what might happen in the next 10 to 20 weeks.
Diversification gives protection
Smart investing does not rely on one country, one industry or one part of the market performing perfectly.
At Compound Wealth, we build portfolios that typically include:
New Zealand shares
Australian shares
Global developed shares including the United States
Emerging markets
International and domestic bonds
For clients with a higher risk appetite, we also include satellite allocations to alternative assets such as Bitcoin or commodities to broaden the mix of return drivers.
This approach helps smooth the ride. If one market slows down, others may be gaining pace.
The rebound is what matters
The best days in the market often occur very close to the worst days. Investors who try to time their exits are far more likely to miss those sharp recoveries.
History shows that missing just a handful of the strongest days can reduce long term returns dramatically. It is time in the market, not timing the market, that builds wealth.
A useful guide on timing markets
We have created a short presentation that highlights the risks of trying to predict short term movements:
The Dangers of Market Timing
https://www.compoundwealth.co.nz/blog/the-dangers-of-market-timing-what-you-should-know
It shows that:
Pullbacks are a normal part of investing
Missing a handful of positive days can halve long term returns
Political and economic predictions do not reliably improve results
This reinforces why short term guessing can be far more damaging than short term volatility.
Improving these rules would help people far more than higher contribution rates alone.
Even bad timing can still work out
No one enjoys watching markets fall. But investors who entered the market right before the GFC have still experienced strong growth if they simply stayed invested. The biggest mistakes tend to happen when investors react emotionally during downturns.
Focus on what you can control
There will always be noise in the world. There will always be reasons to delay investing or to exit too soon.
A well constructed investment plan:
Is aligned to your goals
Matches your time horizon
Keeps costs low
Manages risk sensibly
Maintains discipline through market cycles
This is where real value is created over time.
The bottom line
Trying to predict market highs and lows can feel appealing, but it rarely leads to better results.
Long term investors who stay diversified and remain disciplined have historically been rewarded.
If you have concerns about your current investment mix or simply want to review your long term plan, we are here to help.