Several others have asked me the same thing. Hey, we all know that no one controls the market, and we’re all trying to win in our portfolios, so why do some people seem a mess about and others seem calm? I’d like to say the answer is easy, but the truth is that you have to remind yourself that emotions are horrible business partners. Our emotions almost always lead to one or more of the following: 1. Timing the market; 2. Fad investing; 3. Losing sight of the long-term.
Market Timing: Historically, winners in investing stay invested. I know it’s tempting to try to pull out when you think you have some sort of premonition then re-enter when you’re hit by the same fancy, but the reality is this: you don’t know. I don’t know. No one knows. It’s impossible to know when the floors and peaks are. Some studies have shown investors who attempted to invest this way typically earn nearly five percent less than the investments they’re using. Why? Hunches aren’t facts. Staying calm here requires staying invested.
Fad Investing: How does a fad become a fad in the investment world? It’s enjoyed a nice run recently. Naturally, people thing they should flock there, but in reality, the time to have bought whatever it is or was has already passed. Most Fad investors have no idea until it’s too late that they’ve been buying high and selling low. No one wins that way. Staying calm here requires staying diversified.
Losing sight of the long-term: The market has historically had some sort of pullback in it almost every year. If we let our window of evaluation get too small, we’ll miss the proverbial “forest for the trees” by not allowing investments to do what they do. No investment is immune to some sort of fluctuation. Staying calm here requires investing with your goals in mind.
I’ve said it time and time again that a lot of what I do is almost like therapy. How do I stay calm? I stay calm by keeping emotions out of the formula. Doing this will help you stay invested in a goal-specific, diversified portfolio that matches your risk-tolerance. Come see me; I’ll show you how.
You can contact Joey at 1940 N. Jackson St., Suite 140, here in Tullahoma. 931-454-2435 or visit www.edwardjones.com.