Stay invested when the going gets tough

ASIAN markets, which have been grinding lower after hitting a peak in January, took a turn for the worse this week. Given the many uncertainties today, it is understandable that some investors may be tempted to get out of the market and wait for calmer times to return.

But history has shown that this is far from a wise move. Selling out after the markets have taken a plunge means investors will miss the best days in the market, which typically come following a sharp turn southwards. Taking the losses and missing the subsequent rebound is hugely detrimental to an investor's portfolio.

The accompanying chart shows the Straits Times Index total return index, i.e. with dividends reinvested, over the last 16 years or so. The one in the middle shows the return profile of someone who stayed invested since Dec 31, 2002.