Teacher Retirement Plan – Investment for the Long Term

Teacher Retirement Plan – Think time, not timing

What puts some people off stockmarket investment for their teacher retirement plan is the fact that market fluctuations could mean they lose money. This is why it is recommended that investors should take the long term view of their teacher retirement plan– typically at least five years or more. Indeed, past experience has shown that, the longer you hold a teacher retirement plan investment for, the smaller the likelihood you will lose money and the greater the chance you will make money.

Research, covering a 30 year period, is illustrated here and considers all 349 possible monthly start points over that period. As you can see, an investor taking a five year view would have made money in the vast majority of instances from a UK teacher retirement plan portfolio. For those taking a ten year view of their teacher retirement plan they would have made money in all instances.

However, please note that past performance is no guarantee of future returns. The value of a stockmarket investment and the income from it can go down as well as up. You may not get back the original amount invested.

Teacher Retirement Plan – Don’t let the downs get you down

It is quite common to be distracted from your long-term teacher retirement plan investment goal by short-term market fluctuations. This is particularly so at times of uncertainty – it is only natural to be concerned about making an investment, or even consider selling existing investments, when stockmarkets are falling.

However, many experts agree that investors will usually be better off resisting the temptation to make changes to their long-term teacher retirement plan investment strategy in reaction to short-term market movements.

This is because it’s too easy to miss the gains. Just as sharp falls in stockmarkets tend to be concentrated in short periods of time, the best gains are similarly concentrated. Because these gains often occur just before, or after, a market fall – an investor who tries to time investments for their teacher retirement plan is highly likely to miss the best gains. It makes little difference over the long term Research has shown that, over the long-term, choosing the ‘right’ day to invest makes surprisingly little difference. This research shows the returns from three different hypothetical investment strategies – all investing in UK equities:

1. Investing each year when the market is at its lowest – the ‘best’ strategy
2. Investing each year at the market high – the ‘worst’ strategy
3. Investing at a random date (1st January) – a typical investor’s strategy

Not surprisingly, adopting the ‘best’ teacher retirement plan strategy of investing at the market low has produced the highest annual return. However, the difference in returns between all three strategies is remarkably small.

Source: Fidelity’s research 1.2.73 to 1.2.03. Standard & Poor’s. FTSE-A All-Share Index with net income reinvested. Cumulative returns over 1, 5, and 10 years on all eligible time periods at one month start intervals.

Teacher Retirement Plan