What does it mean to "sit still in the boat"? by Ylva Svendsen

Large fluctuations mean that many people jump off the boat at the worst possible time, and it often takes time before the money is put back in.

Only you know your point of view, and you may not have the same point of view as your neighbor, me or the person speaking in the media.

The common thing is that something has happened that causes the markets to panic. Stock, bond, commodity and interest rate markets react by changing their values ​​very quickly. So quickly that it is easy to fall behind.

It's quite difficult to time your buys and sells. Some people can do it, of course, but I'm at least humble enough to admit that I haven't been "anyone" in this regard so far. What I've observed is that large fluctuations cause many people to cash out at the worst possible time, and it often takes a long time for the money to be put back in.

Morningstar's "Mind The Gap" study from 2023 estimated that the average European mutual fund investor lost 1.32 percentage points of return potential annually because we bought and sold funds at unfavorable times. We bought after the returns had increased and sold after the mutual funds had lost. And what's worse, these reports typically show that the more fluctuations the funds had, the more of the return potential is lost by buying and selling at unfavorable times.

The greater the fluctuations the funds had, the more of the return potential disappears.

Thomas Furuseth's

Prerequisites for "sitting still in the boat" to work:

The advice that you should not "throw your cards" in the middle of the storm is only suitable for you if several prerequisites are met.

-You should have the ability and nerves to sit through a long period of turbulence.

-You should have put together your savings in a way that takes into account when you need the money.

-The composition should be well-founded and contain different types of investments, such as a buffer, fixed-income investments and possibly equity funds (shares). Housing can be a combination of consumption and investment.

-You should have a safety margin in your everyday finances.

-You have control over your debt level. That is, no expensive loans, and a comfortable debt level. Debt increases the return potential, but it also increases the risk in your finances. In the worst case, high debt and high risk-taking can overturn your personal finances.

-The size of the portfolio plays a role. If you are completely dependent on your savings for something very important, it may be worth having a low share of stocks just to be sure that you have the money you need.

Then you can "sit quietly in the boat".

It really helps to have a plan for how you are going to save, how long you are going to save and how you are going to spend the money. It is not abnormal to not have a plan, but at least try to have a loose idea of ​​why you are saving. It gives you a beacon up there.

Money that you need in a relatively short time, i.e. zero to three years, should not be in stocks or mutual funds. If a difficult market comes, and it can come suddenly, you may be forced to sell at a difficult time. Have you found yourself in a situation where you need the money in a short time, there is unrest, and you still have investments in mutual funds? Well, then it may still be right to sell.

If you have put together a savings that you are comfortable with, the best thing to do is just continue with the plan. It increases the odds of success, even though nothing is guaranteed. You can't control the markets, and it's very difficult to predict them, at least for most of us. Keep saving through thick and thin. When the stock market goes down, you'll get more shares for the same price.

Regularly look at the distribution of your assets. If you think the share of shares is starting to get high, move more of your savings towards interest. If the stock market is turbulent and falling, it's often profitable to add to it there. If you find this exercise difficult, choose a combination fund that has the right share of shares for you, so you don't have to deal with it.

If you're going to do something different from the markets, you have to stand by your choices. You should have a consistent method for investing. If you change your method according to the weather, you'll most likely fall behind. Standing by also means that you'll look stupid at times. It's part of the game. Just look at the world's most famous investor, Warren Buffett. He had a record cash balance before the stock market peaked, and it's not the first time he's done the opposite of everyone else. His cash holdings had been rising for a long time as stock prices rose, and he says it's because he couldn't find good investments that fit his philosophy.

Tariff walls can reduce return prospects

It is clear that tariff walls around the US are not good news for stock markets. There is a good reason why the markets have fluctuated a lot, and until it becomes clearer what the outcome will be, there may be more unrest ahead. We do not know exactly how much weaker growth and higher costs companies will be exposed to, but uncertainty is not good. It means that investments are postponed and we sit on the fence, which helps to reinforce uncertainty.

Add slightly high US stock valuations, and it is quite possible that there will be weaker returns over the next ten years than we have been used to. Who knows? Not me, anyway. At the same time, interest rates have become higher than we have been used to in the last 15 years, so you can combine risk reduction and at the same time have a current expected return going forward.

At the same time, if we go back to 2014, there were also many who expected reasonably moderate returns from the stock market over the next 10 years, while many pointed to emerging markets as a good place to be for the next ten years. It was a disaster.

How to measure fund returns

Returns for funds, and all other securities, assume that you invested everything at the start and sold everything on the last trading date, while our real returns depend on the timing of purchases and sales. Therefore, Morningstar investigated whether monthly savings would improve the odds of success. The answer is "yes", because stock markets are often upward, it is profitable to get in as early as possible. The exception was if there are a lot of fluctuations along the way and the returns were lukewarm, then spreading the investments over time worked. Both investor returns and time-weighted returns have a bias in that much of the money was included from the start.

Savings agreements are excellent, as long as it is set up so that you invest the money as soon as you have it. It is disciplining, and you get into a good habit that you can maintain over time.

When you should not "sit still in the boat":

-You should not be overconfident even if you are sitting in a giant boat. The Titanic went down in the face of an iceberg. It is wise to board the lifeboat, especially if you have taken high risks in individual stocks. A stock that has fallen 80 percent can fall another 80 percent, but the impact of the second drop in kroner is of course much smaller. 100 kroner becomes 20, which then becomes 4.

-Another point is if something changes. Personally, I have taken relatively big steps twice because something unplanned happened that meant I needed the money. When the plan changes, it may be right to take action even when the storm is at its worst. It is not the storm that is decisive, but that you need the money.

-Have you been thinking about withdrawing your money for a long time? If you have not been able to get your finger out, market turmoil may be something to remind you of precisely this. It's not the best plan in the world, but better late than never than when market turmoil destroys your portfolio even more.

-You should also be especially careful if you have a lot of debt. Then it may be right to press the emergency stop.

An accident rarely comes alone

There is a good reason why there is an expression like "an accident rarely comes alone". Chain reactions of events can occur. For example, market turmoil, you lose your job, your relationship breaks up, the housing market doesn't work out for you.

In desperate times, desperate measures must be taken. It is not always the case that we can plan for everything and we cannot be prepared for everything. Some measures must be taken under great uncertainty, and then good enough is what applies. The only thing I would encourage is to give yourself enough time to think through your decisions. Sleep on it to be as sure as you can that you are doing what you think is right. By giving it some time, you activate the more rational part of your brain and not the one that acts on instinct.

The content of the article is to be considered marketing material and should not be construed as an offer to buy or sell financial instruments or as investment advice tailored to the individual investor's situation. The creators of this articleassume no liability as a result of the content of the article being used as the basis for any investment decisions.

The expression "Sell in May and go away" is a well-known adage in the stock market. It suggests that investors should sell their stock holdings in May to avoid a period of historically weaker market performance during the summer months (May to October) and then reinvest in November.

Here's a breakdown of the history and reasoning behind this saying:

Origins in London:

• The saying is believed to have originated in London's financial district in the 18th or 19th century.• The original full phrase was "Sell in May and go away, come back on St. Leger's Day."• St. Leger's Day refers to a prestigious horse race held in mid-September in the UK.• Wealthy British aristocrats and bankers would typically leave the city for their country estates during the summer and return to London after the St. Leger Stakes. Since they were away and couldn't monitor their investments, they would sell their shares before leaving.

Modern Relevance:

• While the historical trend exists, the "Sell in May and go away" strategy is not foolproof and has not consistentlydelivered better results than a buy-and-hold strategy in recent decades.

While there has been some historical basis for the trend, its reliability as an investment strategy in modern markets is debatable.

The history behind the "random walk" theory in the financial market is fascinating and spans over a century, with key contributions from mathematicians and economists.

The Pioneering Mathematical Work:

Louis Bachelier (1900): A French mathematician who is widely regarded as the father of the random walk theory in finance. In his PhD dissertation, "Théorie de la Spéculation" (The Theory of Speculation), Bachelier analyzed the Paris Bourse (stock exchange) using sophisticated mathematical tools.

• He observed that price fluctuations appeared random, similar to Brownian motion (the random movement of particles in a fluid). Interestingly, Albert Einstein independently described Brownian motion five years later.• Bachelier developed mathematical models based on the idea that past price changes could not predict future price changes, and that the expected profit for a speculator was zero.