I received a call from a friend earlier this week, asking if they should make changes to their investment portfolio. I knew the answer was that they should do nothing. They had a plan that they were following, adding additional funds to their retirement accounts every pay day. Their asset mix was set to their risk tolerance. Technically, they were all set, but emotionally they were unsettled. I knew the feelings that they were having, as I have the similar feelings in the past when facing previous volatility in the market.
What do I do when faced with market volatility, I go for walk. Do I go for an actual walk, sometimes, but I do separate myself from the situation by not thinking emotionally about our investment. My wife and I have our plan for our financial future, and we stick with the plan. We review the plan occasionally to make sure our life goals haven’t shifted or changed. Today we are in an investment phase and will continue in this phase until my wife retires from teaching. Something we don’t do, we don’t change our asset mix because the market did something. Why? Because the market is always doing something! Sometimes it’s going up, sometimes it’s down, but it never stays exactly the same. It took me two financial crashes to learn the lesson. First was the DOT COM bubble, and then the housing bubble to learn to no react market events. In both instances, I sold holdings on the way down, and waited for them to come back up to buy those holdings back. Why did I do that? I was scared, I was acting on emotion, I committed the cardinal sin of investing. I sold low, and bought high… I did this because I wasn’t actually investing, I didn’t know how to invest. But I did finally figure out that I needed to learn about investing, not just go through the act of investing in funds.
Do you need to become a knowledge investment expert to be successful, no, you don’t. You can invest and be successful doing the following:
Save/Invest a portion of every dollar you earn in an target date fund from a reputable company such as Vanguard, Fidelity, or Schwab. This is the set it, and forget method. Seriously, you don’t need to check your account, you don’t need to think about your asset mix, it couldn’t be simpler.
If you have questions, comments, or just want to discuss money, you are welcome to contact, and I will be happy to discuss. It won’t cost you anything to talk, but your time.
Thank you for reading… Share with anyone you think it might help.