Short-term panic by investors will lead to long-term underperformance, according to research by Perennial Investments Partners.
Perennial's study found that an investor only had to miss the best 27 days over the last 19 years to have reduced their return to the risk free rate, or cash return, over the same time period.
"The bottom line is, if you focus on the short-term you could easily lose the nerve to be invested in growth assets which could greatly deplete your long-term wealth as it is indeed true that over the longer term, diversified growth assets will outperform diversified defensive assets," Perennial Investment Partners head of retail funds management Brian Thomas said.
Tracing data back to 1988, Perennial found that over 4957 trading days, 55 per cent of the time market returns were either positive or at par.
"Overall, feedback from financial planners is that their clients have not panicked over recent event . [but] if they had panicked on Friday August 17 and withdrawn from the market they would have missed the biggest weekly surge in over 32 years the very next week, with Australian shares up 7.4 per cent for the week ending 24 August," Thomas said.
