Five timeless principles for investing success

29 February 2024

Capital Markets and Strategy Team

While investing in volatile times can sometimes challenge your discipline and commitment, there are timeless principles to include in your investment strategy that can help ease your mind and keep you focused on the long term.

1. Think diversification

It’s rare for any investment to repeat as a top performer from one year to the next. Diversifying across various economies, businesses, countries, and popular investment classes can help spread risk, remain more consistent, and reduce the potential for underperforming assets to impact your portfolio.

Historical asset class rotation, 2013–2023

Calendar year total returns by class assets (%)

Source: Manulife Investment Management, Bloomberg, as of 31 December 2023. Total returns are shown in local currency or in USD for multimarket indexes.

2. Be rational, not emotional

In good times, investors are excited, they want to invest more and often “buy high.”

When markets turn negative, investors become fearful and decide to cut their losses and “sell low."

Stay disciplined and committed to your long-term investment plan to avoid riding the emotional roller coaster.

An investor’s emotional roller coaster

Source: Hays Advisory. This chart is an example and does not represent the performance of any actual investment. This is not meant as investment advice. For illustrative purposes only.

3. Missed days mean missed opportunities

The difference between investment success and disappointment can boil down to a few days of being in or out of the markets.

By staying fully invested and not missing the best investment days in 2023, investors would have outperforming returns.

2023 S&P 500 Price Index
Fully invested vs. missing the best days

2023 Global Bond Index
Fully invested vs. missing the best days

2023 U.S. Bond Index
Fully invested vs. missing the best days

Source: Bloomberg, Manulife Investment Management, Capital Market and Strategy Team. As of 31 December 2023. The charts are examples and do not represent the performance of any actual investment. This is not meant as investment advice. For illustrative purposes only.

4. Measure performance over time, not overnight

Accept the fact that markets will rise and fall but over time markets have always moved higher.

Taking a long‑term perspective can help you stay the course when markets move from crisis to opportunity and back again.

Despite setbacks, the MSCI World Index shows growth over the long term

Growth of USD$10,000

Source: Bloomberg, Manulife Investment Management, as of December 31, 2023. For illustrative purposes only. Red circles indicate periods of market decline. The index is unmanaged and cannot be purchased directly by investors. Past performance does not guarantee future performance.

5. Turn market volatility to your advantage

By investing a fixed dollar amount in regular intervals dollar cost averaging can help you buy more units of an investment at lower prices and fewer at higher prices.

This helps take the worry out of making a single lump-sum investment at the wrong time.

12-month comparison

$12,000 single lump-sum investment vs. $1,000 monthly investment using dollar cost averaging

For illustrative purposes only.