You have the power to control how you go about investing. Your actions as an investor can either lead to a better investment experience with you successfully achieving your goals, or these actions can make it harder for you to reach your desired destination. Daily market news and headlines will continue to cause anxiety and fear that can lead to bad decision-making. Avoid the fads and the talking heads, stay disciplined and focus on these main areas:
#1. Create an investment plan that fits your needs and risk tolerance.
#2. Practice smart diversification.
#3. Avoid market timing.
#4. Manage your emotions.
#5. Stay disciplined and take a long-term view through market dips and swings.
#6. Manage expenses, turnover, & taxes.
If your main investment strategy is centered around picking individual stocks and timing when to buy into the market and when to get out of the market, then it is time to stop and reevaluate your investment approach.
Remember that famous scene from the movie Office Space? (a classic film, one of our personal favorites!) Market-timing is like switching lanes in heavy commuter traffic. You don’t arrive to your destination any faster, and you caused yourself a lot of stress and anxiety trying to get there. Market timing doesn’t work for most investors because you have to know exactly at the same time when to get out of the market AND when to get back in. And sadly the stress of being in the market will be replaced by the stress of being out of the market, so you didn’t change the stress.
Most investors are better off in the long run by creating a globally-diversified investment portfolio suitable for their goals, investment time horizon and tolerance for risk. Smart diversification means holding securities across market segments in both your home market (the country where you live) and outside of your home market to broaden your investment universe.
Financial markets have rewarded long-term investors, so if you are seeking a positive return on your investment and growing your wealth, let the markets work for you. Working with a Financial Advisor can offer you expertise and guidance to help you focus on the actions that add value and stay on the right track.