Dollars & Sense: Time to come out of hiding? Five tips to take the emotion out of investing
Dollars & Sense
Concerned about the stock market? If so, you’re not alone. In volatile markets, it’s common to feel anxious about investing. However, successful investors know that while weathering market moves isn’t easy, it can be rewarding. To help you keep your emotions in check during uncertain markets, consider the following steps:
• Take advantage of market opportunities. Stock prices fluctuate for a lot of reasons. The good news is that historically they have rebounded from setbacks. In fact, during market lows, you may have the opportunity to add to your portfolio with quality investments at attractive prices.
• Don’t try to time the market. For investors, trying to outguess the market is not only a stressful strategy, it can also be an expensive one. By moving your portfolio to the sidelines, you might miss a market downturn, but you could also miss a rally. That’s because most of the market’s gains are often clustered into very short time periods. To benefit from the market’s long-term performance, you need to make a plan and stick with it through market ups and downs. Please remember that no investment strategy can guarantee a profit or protect against a loss.
• Don’t lose sight of your goals. Some investors believe they can soften the effects of a market decline by selling off their stocks and buying more conservative investments. This could prove a mistake, especially if you’re investing for long-term financial goals like retirement. While stock market volatility can be unnerving, stocks historically have outperformed other major asset classes. Of course, past performance does not guarantee future results, and while stocks may have outperformed other asset classes, they also may be more volatile. Investors should carefully consider their ability to invest during volatile periods in the market.
• Maintain your mix. During difficult markets, it is inevitable that some of your investments will perform better than others, shifting your portfolio from its original target allocation. That’s why it’s important to review your portfolio periodically and rebalance your holdings as needed to bring your asset allocation back in line with your goals, risk tolerance and time frame.
• Work with a professional. A successful long-term investment strategy evolves as your needs and goals change over time. An experienced financial professional can help you take an objective, unemotional approach to investing and keep your overall performance and goals in sight regardless of market ups and downs.
Remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
Mike Davis is a Rifle-based financial representative with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Co., Milwaukee, Wis., and its subsidiaries.
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