This study has some very interesting results. Everyone should learn that regarding investing the best course is to develop a prudent process and then remain disciplined to that process.
STAYING THE COURSEWhen the markets move up or down, you are tempted to change your investments. This is costly (commissions) and you are often trading at the wrong time. Instead you want to stay the course.
When you started with your investment plan, you determined an appropriate asset allocation. It is appropriate to re-confirm that this is the correct asset allocation for you. It should only change if your life has changed in some way (new job, new child, marriage, retirement). Also if you are just uncomfortable with the levels of risk that you are taking as a result of the asset allocation that you set, it may be time to revisit this step and set a new, more appropriate allocation. This is a one time or occasional event, not a knee-jerk reaction to market levels!
You are investing for the long term. There will be hiccups along the way. But, the real measure is what you are able to build from year-to-year. You want to be able to retire with the greatest value possible! The investment return path may not be only up, but, over time, it will be generally up if you develop a long-term view. And, by creating a diversified portfolio, you will find that you may have a bit of cushion in the tough times. The U.S. stock market may be down, but international stocks may rise or bonds may perform well. It is the overall portfolio that determines your wealth.
We all like to “fix things”. However, it is very difficult and close to impossible to successfully and consistently time the market. There are very few professionals who do this well and fewer that do so consistently over time. So, when you attempt to fix things by trading, you are paying your broker, but not necessarily helping to accumulate long-term wealth. You usually take your portfolio away from the position that will help you in the long-term and in the market turnaround. We don’t know when market ups and downs are coming, so it is best to stay the course.
This trait will lead to success for these leaders as well as their employees.
Please comment or call to discuss how having a plan and remaining diligent will lead to success.
- Robert Powell’s Your Portfolio: Not buy-and-hold, but buy-and-sell rarely (marketwatch.com)
- Investment Portfolio Asset Allocation & Performance Update – December 2011 (mymoneyblog.com)
- 2011 Winners Can Make You a 2012 Loser (401kplanadvisors.com)