What a Long Strange Trip it's Been...
Bulls and Bears
Many experts consider investing in the stock market the best way to grow wealth, especially if you are young and have a long investment time horizon. However, it can be difficult to avoid much of the daily market “noise,” and you may start to question your financial decisions. Such seemingly extreme volatility can have even the most steadfast investor feeling a little unsure on occasion. The deluge of unprecedented news and the responding economy may leave investors questioning how best to proceed. Better to hunker down and ride it out? Sell? Invest in more conservative products?
Slow and Steady Wins...
It’s important to remember that long-term investment projections and short-term fluctuations are not one in the same. Most of the time the best advice for a nervous investor is to avoid making major changes in your portfolio during periods of volatility. If your overall goals have not changed, do not make rash decisions about your portfolio out of fear and unease. Buyers may be swayed or motivated by the actions of friends, neighbors, relatives etc. but such well-meaning advice can often cause more confusion. The daily volatility of stocks is often tied to speculation and expectation, may be swayed by political rhetoric, and definitely makes for good (yet stressful) headline-grabbing entertainment. For the seasoned investor with an eye on the long-term retirement goals, sometimes the best advice is to tune out the daily noise and focus more on the macro view of your investments and their gains over time. Short-term corrections are swift and severe. They can wreak havoc, and a correction may even erase all year-to-date gains. But, the climb out of a market correction can often be just as quick. It is important to discuss any investment changes during this time with your financial advisor. After all, they’ve designed your portfolio to be diversified enough to withstand the mercurial nature of the stock market.
Get Educated and Seek Advice
Evidence-based investing strategies prove that regardless of political control and elections, or the rise and fall of interest rates, investors with well-balanced portfolios grow over time. It is important to stay disciplined. If the unpredictability of the markets causes you to feel compelled to change something about your portfolio, your first call should be to your financial advisor. It is their job to nurture and grow your investments, as well as protect you from making emotional decisions that may hurt your performance in the long run.
Avoid Acting on Emotion
The peace of mind in having a good investment team is twofold: the first is that watching the market daily makes it almost impossible to determine your performance over longer time periods. Secondly, for most well-balanced portfolios, much of the advice you will hear is to remain calm and stay the course. Getting too involved with the daily fluctuations of the market can be both addicting and dangerous to your overall portfolio. Overly active investors often buy, sell and trade at the wrong times. When emotion, particularly fear or greed, get involved in the process, we make mistakes. Trying to time the market, catching the tops and bottoms, buying low, selling high etc. can really hurt long-term goals.
Peace of Mind
As concerns about the markets creep up, seek advice from trusted and knowledgeable sources, do your research and understand how your portfolio is expected to perform during different time periods. Have a plan and be able to stick to it during periods of positive market returns as well as pullbacks. There is a lot of noise out there and it is nearly impossible to tune it all out. Those who have confidence in their robust and diversified portfolio, and confidence in the quality of their financial counsel, can hopefully find peace of mind knowing that their investments are secure.
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