Don’t let your emotions get in the way of Investing
Investing can be emotional.
Even seasoned investors may act impulsively in the face of turbulent markets, incendiary headlines, or the lure of the hottest new fund. That’s why a carefully considered investment plan is an important tool to help you keep things in perspective. In times of uncertainty, ask:
Fully understand your Financial Plan
- Your plan should be based on your individual circumstances, including asset allocation/risk tolerance, savings rate, and short- and long-term goals.
- Understanding the reasoning behind the elements of your plan can help you stick to it over time. “Live or leave on”.
Avoid reactionary decisions
- Investors who flee the market may miss the worst and the best trading days. Think Spring 2020.
- A balanced portfolio is designed to withstand market turbulence over time.
- Impulsive actions disrupt adherence to your financial plan, which was carefully constructed to best serve your needs.
Focus on asset allocation, not funds
- Unlike with a consumer purchase, product ratings are typically poor criteria for investment decisions, think Morningstar rankings
- In the United States, more than 90% of return variability of a diversified portfolio can be explained by the asset allocation policy.
Stay focused on your long-term progress
- The performance of a single investment or asset class is less important than the performance of your entire portfolio over time.
Homage to the Grocery Store:
“The first grocery store in American boasted maybe 200 products. Most of the goods available were shelf=stable commodities like sugar and flour that were scooped out of barrels on demand by customers. During the mid-twentieth century, large chains gobbled up smaller shops and increased their market share to 50% of groceries sold. In the 1960s and 1970s, stores went from being 3,000 sq. ft. mom-and-pop shops to being 30,000 sq. ft. retail chains. However, even by 1975, the average grocery store featured fewer than 9,000 items. Supermarkets today can measure up to 90,000 sq. ft., with the median store measuring around 40,000 sq. ft. By 2008, the number of products had quintupled to around 48,000” (Payden&Rygel, 2020).
What is the CERTIFIED FINANCIAL PLANNER™ designation?
A CERTIFIED FINANCIAL PLANNER™ is a type of financial advisor who possesses one of the most rigorous certifications for financial planning knowledge. A CFP® professional must have several years of experience related to financial planning, pass the CFP® exam and adhere to a strict ethical standard as set by the Certified Financial Planner Board of Standards.
CFP® pro’s, unlike some other types of financial advisors, are held to a fiduciary standard, meaning they are required to act in their client’s best interest. An advisor can lose their right to present themselves as CFP® professionals if they do not adhere to the practice standards and code of ethics.
We are committed to helping you
- Sticking with your financial strategy also means rebalancing as scheduled, we cannot over emphasize how powerful long-term gains can be from this.
- While you may be reluctant to sell a few good performers, maintaining your asset allocation is important to help minimize risk. We need to check our biases.
- Historically, portfolios that were rebalanced as scheduled fared better than those that were not. This has been a large contributor to excellent growth rates.
Revisit the Principles for investing success
- A focus on goals, balance, costs, and discipline is an important foundation for a successful portfolio.
A balanced, diversified investor has fared relatively well
There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. Diversification does not eliminate the risk of market loss.
All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services
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