Investing for a longer term key to riding out market swings

INVESTORS should expand their investment horizon to increase the chances of getting higher income, especially during times of crises when markets are highly volatile.

“The global market turmoil triggered by the pandemic has underscored the view that as investment horizon increases, the chances of earning positive returns also increase as more time helps smooth out the volatility of returns,” Manulife Investment Management and Trust Corp. (Manulife IM Philippines) said in a note on Wednesday.

Its study showed a 10-year investment horizon for equities in Philippine Stock Exchange index (PSEi) will likely yield a 100% positive return, better than the 94% rate for a five-year duration and the 68% for one year.

Manulife IM Philippines said in the past, equity markets generally posted a sharp rebound after crisis-induced sell-offs, as observed in markets in the Philippines, the United States, and Hong Kong/China, which have posted returns of 39%, 75% and 56%, respectively, a year after hitting their bottoms in March 2020.

“This market behavior was repeated in 2020 when the COVID-19 pandemic began to take center stage... Investors who stayed invested and even added to their investments in these markets made the correct and profitable decisions,” it said.

Aside from investing for a longer term, Manulife IM Philippines said players should also consider applying the cost averaging strategy, where they invest regularly to manage their risks, especially for those who were not able to catch the bottom of the market. —