There’s a reason that investors tend to only hear about “looming” market doom or “imminent” market growth. While many news outlets have an incentive to draw viewer attention with wildly bullish or bearish predictions, these sensationalized views may be a distraction to a sound investment approach. When tempted to make a radical change to your investment portfolio based on these headlines, it is important to recall some basic fundamentals to keep your plan on track.
Tune out the noise:
“Markets at All Time Highs” – The reality is that many equity asset classes like US Small Caps, US Large Value, International, and Emerging Markets, among others, are still down double digits YTD. There are plenty of opportunities to invest into portfolios at relatively low prices. If you’re building your wealth, and you know where to look beyond the headlines, there is always an opportunity to growth your wealth.
Market movements are notoriously difficult to predict. The media outlets that scream the loudest are not always the most accurate. The fallout from attempting to time the market in response to one of these predictions can be dangerous to your portfolio.
Look, but don’t stare:
This risk specifically affects recent retirees and soon to be retirees with “more at stake” and more time on their hands. Also impacts those who recently inherited large amounts of money and are “new” to the responsibility and emotional rigors of managing wealth.
While it’s important for investors to know the performance of their accounts, short-term market fluctuations can be quite volatile. While the probability of realizing a loss within any given day is high, the likelihood of realizing a loss historically has decreased over longer holding periods. Periodic review of an investment portfolio is necessary, but investors shouldn’t let short-term swings affect their view of the future.
Stay focused on the long term:
Understand long term goes beyond quarterly or even annual returns
It is not uncommon for short term trends to last several years; however, that does not mean you should deviate from your longer term investment plan. While it may not always grab headlines, a sensible, tailored investment plan may be the best solution to meeting long-term goals.
Work with an Independent CFP® who acts as your fiduciary to help tune out the noise and help you stay focused on what matters most.