Don’t Set It and Forget It
Prefer to listen rather than read? Pair this post with Deliberate Money Moves Podcast: Don’t Set It and Forget It.
Ok, so you’ve bought into ignoring short-term market fluctuations, but it’s likely not that simple. In my experience the idea of investing for the long run can fade quickly when the market gets stressed.
Think about it – when the market is down, not only do you feel less wealthy, but the news is bad. Much worse than normal. Maybe there are layoffs (like today) or maybe we are in a recession. Perhaps it’s even worse – bankruptcies, high inflation, maybe even war.
When these things happen, you need something to hold onto. Something that is true in all times. That’s what I call an Investment Philosophy. But not only that, you’ll probably need a coach to help you understand and interpret what’s going on in the context of your Investment Philosophy.
Benefits of A Financial Advisor
Saving clients from making the "Big Mistake" of trading out at the wrong time is worth much more than any fee I could charge. I can't tell you when or if you will be tempted to sell at the wrong time, but I can tell you that our own human nature will push us to do the wrong things when it comes to investing.
In short, our emotions drive us to buy high and sell low. Exactly what you are not supposed to do. If we’ve structured the portfolio correctly, so we have an idea of its ups and downs, your faith might be shaken at times, but with appropriate coaching it should never break.
But it’s not just the initial structure that matters. If you target, say, 60 percent in stocks and the market has risen through the years, without rebalancing, your actual portfolio could be at 65, 70, or even 75 percent stocks.
Meaning, when a crash comes, it will hit you much harder than you expect. And that can greatly increase the risk that you make the “Big Mistake,” which can decimate your financial future. This is why the ongoing management of your investments is so important.