Four Investing Reminders
Recently, it seems like the markets have been dominated by news-driven storylines.
Whenever we’re in a period like this, we think it’s handy to remind ourselves about some basic Do’s and Don’ts that apply no matter what the media’s talking about.
1. DON’T make emotional decisions.
During times of uncertainty, fear, or excitement, humans are prone to make decisions based on their “fight or flight” response. And this is true of our financial decisions!
When market volatility strikes, many people make knee-jerk decisions simply so they can feel like they feel “in control.” When the markets are on a tear, some people fall prone to the “fear of missing out” and take on more risk than they should. Knee-jerk, or emotional decisions, often tend to do more harm than whatever it is we’re reacting to!
So, always ask yourself, “Why am I doing this? Do I have a specific reason, or is it just because I feel like I have to do something?”
2. DO think long-term.
Investing, by its very nature, is a long-term activity. Even people who are close to retirement are still investing for the long-term. Markets fall over days, weeks, and sometimes, months. But history has shown that they rise over the course of years and decades, which is good, because you’ll probably be investing for years to come!
When the markets are volatile, investors often get reactive.
Instead of sticking to their long-term strategy, they sell, sell, sell at a time when everyone is selling, or buy, buy, buy when prices are sky-high because everyone is buying. This means they are selling low and buying high — the opposite of what you want to do.
Remember you’re in this for the long term. The road to your goals stretches for miles. Sometimes, the speed limit is 75 miles per hour. Sometimes, it’s only 25. Trying to take shortcuts just leads to longer delays.
3. DO think about your current asset allocation and risk tolerance.
Whenever you feel the urge to make a move, first look at your overall portfolio and how it’s constructed. Does it still represent your goals and needs? Does it still fit your current situation and your current goals?
Determining that is almost always more important than choosing whether to buy X or sell Y. And remember: You can always ask a professional for a second opinion if you’re unsure!
4. DON’T look at your portfolio each day and stress about every dip in the stock market.
One of the worst mistakes investors can make is to obsessively check how their portfolio is doing. The markets are like a person’s body temperature – they are constantly rising and falling. Just as you probably don’t take your temperature every day, you don’t need to do that with your money, either.
Prioritize your overall financial health over the day-to-day.
If you have any questions or concerns about the markets, please feel free to contact us.
Since 1989 we have helped individuals weather global financial crises and countless personal life events. We provide financial planning and investment management services as an independent, fee-only, fiduciary firm. We want to help you live the life of your dreams, make wise decisions with confidence, and better the world around you. If you are looking for a proactive financial partner who will listen to you, reach out.
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This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.