Patience is an investor's best friend

Picture this: a stock purchase of $10,000 made at the end of 1992 and held until 2013 would have netted the investor close to $49,000 — which comes out to an annual compounding rate of 8.27%. Keep in mind that during this period we experienced the popping of the tech bubble in 2000 and the 2008 financial crisis. Now, for the sake of argument, let's look at the return of the same investment amount, held for the same period of time — 21 years — but sold during a time of stability:

• Sold during the 10 best days: $26,537 in accumulated capital — 46 % less than the amount above

• Sold during the 40 best days: $1,225 in lost capital, for a return of $8,775 or - 0.65%

“This goes to show that it pays to be patient when investing, no matter what your investor profile,” says Pierre Payeur, senior advisor of Strategy Support in Desjardins Group's Wealth Management Division. “And this applies equally for registered products like RRSPs, TFSAs or RESPs, and for unregistered investments.”

There are a myriad of reasons that compel people to pull out of the market for a period of time. The last six months of 2014 alone presented several: tensions in Ukraine, escalation in Syria, resurgent violence in Iraq, economic woes in Europe, slower economic growth in China, the Ebola outbreak in West Africa and the recent drop in oil prices. Needless to say, these events affected the markets and led to the market upheaval last October. “We saw a significant collective drop in the market and a spike in the price of government bonds, which had become a popular choice as a conservative investment strategy,” says Payeur.

Luckily, the market correction was short-lived and the U.S. market has since rebounded to record highs. The Canadian market was a little more sluggish than others, because of the prominence of the energy sector on the Canadian indexes. Despite the prediction of lower oil company earnings due to the price of oil, the markets' results for 2014 weren't horrible:

• Standard&Poor/TSX Composite (Canadian Shares): 10.55%

• Standard&Poor 500 in C$ (U.S. Shares): 24.00%

• MSCI Europe, Australasia and Far East in C$ (International Shares): 3.73%

• FTSE TMX Universal (Canadian Bonds): 8.79%

Payeur suggests that investors try not to let their emotions get the better of them. Market fluctuations happen; the aim to stay the course to capture positive gains. He admits that investors can get cold feet when economic conditions become unstable, which is why calm and patience is the best approach when it comes to long-term investments. “If you want to maximize your chances of reaching your financial goals, stay focused on the long term and don't get distracted by ups and downs in the market,” says Payeur. “And consult your financial advisor for extra support.”