The cycle of market emotions can be described as riding a non-stop roller coaster at an amusement park. When you invest in the financial markets there will be many highs, many lows, and in some cases some plateaus. However, through a sound and research driven strategy you can withstand the ups and downs of the markets and achieve your long term goals. Unfortunately, many solo investors lack discipline and a long term strategy, which leads to a pattern of selling low and buying high.
Market Timing Does Not Work
Some investors mistakenly believe that attempting to time the markets or trying to guess which stock, mutual fund or asset class will be this year’s “winner” is the best approach to investing. However, the reality is that this is an exercise in futility. In actuality, trying to anticipate the movement of the market adds anxiety and undue risk.
Investors need portfolios that reflect their individual financial goals, time horizons, and risk preferences. Although there is no “perfect” portfolio, many investors will find that a sensible approach incorporates diversification across multiple sources of risk and return.
How is this accomplished? Through portfolio diversification. Investing in different types of asset classes around the globe. Basically, not putting all of your eggs in one basket.
The Importance of Time Horizon
Another important aspect of investing is how long you need to invest for growth. If you are 20 – 30 years away from retirement, you can in theory afford to take on more risk than someone who is only 5 years away from retirement. Having a long term perspective that accounts for market cycles will help you avoid the panic that many investors feel who do not have a strategy.
Research Driven Strategies
Successful portfolios are based on research and reasonable expectations, not intuition. Successful, rational investors excel because of a clear methodology and, of course, discipline.
We strive to achieve principal preservation, capital enhancement and inflation protection for our client portfolios.
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