Investment Advice to Live By:
The everyday investor tends to be paralyzed by worry about investments and how to do right for your portfolio. Get the noise out of your head and invest wisely. Take the worry out of investing and focus on advice to live by.
Adopt a long-term point of view
Thoughts around your portfolio should be based on your long-term goals and what you hope to accomplish, not on the daily fluctuation in the markets. Try to ignore the numbers and focus on the end result- do you have a plan in place? Are your goals achievable based on your overall strategy? Adjust your plan as needed and let the market do what it is supposed to over the long-term.
Sell winners and buy losers
The hardest thing for an investor to do is sell winners, it goes against our mindset- winners will keep going up and losers will keep going down. Conversely, as your winning investments move outside of your overall allocation, now is the best time to sell them. You should be moving the excess ‘wins’ from these investments into the investments that are down. This creates the behavior of selling high and buying low.
Don’t go to cash in a panic
As panic from market fluctuations sets in, investors feel safer moving money to cash. However, the question always comes back, if you are nervous now, when will you be confident to put the money back in the market? Typically, the answer to this question is after the market has gone up. Doing this forces you to sell as prices are going down and to buy as pricing are going up. This behavior may cause you to miss the rebound or big returns for the year. It is important to hold cash for a reserve or short term goals. Other than that, you should not be moving money in and out of the market based on fear.
Ignore market predictions
Everyone on Wall Street has a prediction on where the market is going this year, this month and even today. The irony is that there are as many saying the market is going down as there are saying the market is going up. Stay disciplined to your portfolio allocation and don’t make movements based on market predictions.
Turn down the noise
The constant noise from the news and market predictors can be very distracting and unsettling. This can confuse any investor whether it relates to government activity (or lack thereof), the money supply, the interest rate, the market or the next bubble. Ignore the noise and stay true to your plan. Discipline will be rewarded in the long run.