Time In The Market
Federal Reserve this. Brexit vote that. Market highs and market lows. I have casual conversations getting my coffee in the morning, or out at the soccer field from time to time with people that know I’m “in the financial advising business.” It’s nice to talk about the headlines of the day. But I usually end these casual conversations the same way…
- We are financial planners, not investment brokers; investors, not traders.
- We believe the best strategy is time in the market, not timing the market.
The headlines give us plenty to talk about and that’s good if you make investing a hobby. But it can be detrimental if you’re allowing the headlines to dictate how you invest. Recent history shows that the stressful ride down in the bad market times that started the year were quickly reversed in the subsequent months. And what drives the market movement isn’t any one thing that anyone can definitively put their finger on with any degree of consistency.
So while we do pay attention to these important financial events, we remind our clients to take it all with a grain of salt. This isn’t meant to be a critique on any other professional or personal investment strategy out there, it is meant to remind you of a few of our core philosophies for investing.
- Do so within the context a financial plan. It’s far more impactful to have a long-term comprehensive financial plan than to worry about buying and selling small cap investments every other week.
- Done right, investing should be boring. Forget the headline news. That’s for us to worry about. If you diversify your holdings in an attempt to control risk over time, then the short-term moves in the market shouldn’t frighten you or completely change your long-term financial plan.
- Investing is a lifelong process that should be broken down into a series of 1-3 year periods. It takes a strong discipline to look beyond short-term trends and stick to your long-term plan. Trust the good work you did making the plan during a less stressful time.
- Markets go up and markets go down. Expect (and try not to fear) corrections. Be emotionally prepared for the tougher times because if your first reaction is to panic and try to change course you may do greater damage over the long-term.
We work with people, not pie charts, so these conversations will undoubtedly continue. If not the Federal Reserve, it’ll be the election, or another new tech company, or some other big financial piece of news. But remember, we plan for a reason. So no matter the headline, always default to the plan. And the plan is for our clients to spend time in the market, not timing the market.
If that sounds like a lot to consider, that’s OK. Give us a call. We’ll share more of our investment and planning philosophies to help you develop a plan that aligns your personal values, vision and wealth.