Hazards of Short-Term Trading
Timing the Market Can be Hazardous to Your Financial Health
History shows that jumping in and out of the stock market can have a major impact on your investment success. Missing out on even a handful of the markets' biggest gaining days can dramatically affect your results. This table illustrates stock returns represented by the Standard & Poor's 500 and assumes the reinvestment of dividends during a 10-year period, 1996-2006. An investment which was held all 10 years earned an average annualized total return of 8.80 percent. The returns for those who missed the 20 best days were only -0.07 percent.
| 1996-2006 | S&P 500 Annualized Returns |
|---|---|
| Fully invested | 8.80% |
| Miss the 10 Best Day | 3.73% |
| Miss the 20 Best Days | -0.07% |
| Miss the 30 Best Days | -3.34% |
| Miss the 40 Best Days | -6.05% |
| Miss the 50 Best Days | -8.46% |
Source: Ned Davis Research , Inc.
Market volatility can significantly impact short-term performance. Results of an investment made today may differ substantially from the historical performance shown. The unmanaged Standard & Poor's Composite Index of 500 Stocks is a group of unmanaged securities widely regarded to be representative of the stock market in general; results mentioned assume the reinvestment of dividends. An investment cannot be made directly in an index.
The Best and Worst of Market Timing
An old investment adage is, "Buy low; sell high." However, effectively timing the market is very difficult. Most market-watching investors miss the low and invest when the market begins to increase in value. Then as the market peaks and begins to fall, the speculator gets nervous and sells off assets, hoping to minimize losses.
Rather than waiting for the perfect time -- which eludes even investment professionals -- most investors should concentrate on simply investing. Overall, the difference between perfect timing and poor timing may surprise you.
Before investing in mutual funds, investors should carefully consider the investment objectives, risks, charges and expenses of the funds. This and other information is contained in the free prospectus, which can be obtained by:
- Calling 1.800.222.5852 and requesting a prospectus (all share classes)
- Downloading a prospectus (A, B & C shares)
- Downloading a prospectus (J shares)
- Requesting a prospectus be mailed to you (A, B & C shares)
- Requesting a prospectus be mailed to you (J shares)
Please read the prospectus carefully before investing. See the mutual fund section of our site for a description of the different share classes.
