If the blood-letting on the stock market is tempting you to switch into cash, recent research on the negative effects of moving in and out of the market may convince you to stick with equities for the long haul.

It may be that some investors are able to time the markets successfully, but the truth is that most people who try to time the markets get it wrong.

Prudential recently did some research that shows just how often attempts to time the markets erode your returns and deliver a lower long-term return than earned by an investor who stays invested for the long road.

Acsis Chief executive Andrew Bradley says there is no pattern in the way that asset classes move from high to low returns

His graphs and research not only support the argument that it is difficult to time the markets, but also shows that because you can never be sure which asset class will return the best returns in any year, it is best to diversify across asset classes rather than put all your eggs in one asset class basket.

In the 2 years following the 1970 fall in the market, which is on par with last years market fall, the market return was just over 60% for both years. This would bring your p.a. return back to about 12% for the 3 years including the year the market fell. If you had moved to cash it would have taken about 6 years.

Although the economic environment is very different now, the powers that be are actively involved in bringing about stability in the markets, and I believe they will succeed. However, nobody knows how long the recovery will take.  I believe that if you have a time horizon of less than 3 years, you shouldn’t be in the equity markets.