Markets go up and markets go down. That’s what they do. But then again, you know that. That is why you have invested rationally in quality investments, diversified your portfolio among stocks, bonds and cash — and across industry and geography. So, why the anxiety following recent declines? Most likely because you are paying more attention to the news, CNBC, newscasters and others who are motivated to increase viewer or readership — not to increase your personal wealth.
Leaves and branches litter the forest floor. That does not mean the trees are dying. Now is the time for long term perspective. Move your focus from concern (things beyond your control that increase anxiety) to influence (things you can control that reduce anxiety). Reconsider your investment strategy. Any change in your time horizon since the last review? Are your investments properly allocated among equities, bonds and cash? Does a particular industry present greater opportunity or risk in the medium term — to the middle of your time horizon for example. If you were just now setting up your investments, would you make different selections than represented in your portfolio today?
Even those who plays the fools game in trying to time markets would now invest more in equities following a broad decline — not exit those markets or try to sort out winners and losers on the bounce. Warren Buffet is widely quoted as having said “Be fearful when others are greedy and greedy when others are fearful.” Casual investors tend to over react to short term market news — selling low (when others are fearful) or buying high (when others are greedy) damaging their strategy much more than any other investment choice, allocation or diversification misstep.
So, put your emotion in the back seat. Turn off the TV. Ignore the headlines. Focus on your long term goals and objectives and the prudent strategies designed to achieve them. Don’t focus on what you may have lost in recent weeks. Instead, look back over the longer term to appreciate broader results, in spite of transient spikes or declines alonf the way. Fight the tendency to lock in losses. Instead, the current pricing may represent a value. If you just can’t help yourself, consider consumer staples, healthcare, utilities or solid dividend stocks that tend to consistently perform through time. Broad selloffs may have pulled them into value territory relative to their longer term performance.
If you aren’t sure what to do, let us help. Sometimes doing nothing is the right thing to do!