Tips to minimize emotion, maximize investment returns
Do stock market moves keep you up at night? If so, you’re not alone.
Weathering market moves isn’t easy, but successful investors know that a little patience can yield sizeable rewards. Maintaining emotional composure when it comes to your hard-earned money is often easier said than done.
To help keep your emotions in check during uncertain markets, consider the se five tips:
Take advantage of market opportunities: Stock prices fluctuate for various reasons. While past performance is not indicative of future performance, historically stocks 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, with the help of a trusted financial professional, should carefully consider their goals and risk tolerance when selecting investments.
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 timeframe.
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, even in the face of fluctuating markets.
While there’s no guaranteed formula for investing success, maintaining a sense of calm by focusing on your long-term goals versus minute-to-minute returns may help you sleep better at night — leading to better decision making in the long-run.