On the news of escalating trade tensions with China, volatility has once again returned to the market, and along with it, investor alarm. When the market goes down, the temptation to sell your portfolio to avoid further losses can be intense. This, however, is almost always a sure-fire way to lock in your losses.
So what’s the right thing to do? The truth is, there’s no pat answer to that question. Everyone’s financial situation varies according to their time horizons, their goals, and risk tolerance. But there is one thing I can tell you that applies to anyone: It’s important to proceed thoughtfully and carefully.
The biggest mistake some investors make is simply basing their decisions on headlines or fear of loss. Headlines could be misleading (and they change daily), and you can’t always be sure that the advice offered by, say, talking heads on CNBC, is backed by actual data or knowledge. Fear, too, is often a bad advisor, encouraging investors to sell low and later buy back high.
Our firm prides itself on investing according to the best available data. That data steers us away from market timing and active management. While it can feel good to move to cash when the market goes down, doing so successfully requires making two correct choices, when to get out and when to get back in. Years of analysis suggests that almost no one succeeds at this often enough to beat the “steady as it goes” strategy of staying invested during downturns.
One important thing to know is that each of our clients has a customized investment strategy. This strategy is not tied to the daily fluctuations in the market, but to specific needs and long term financial goals.
If you are feeling uncertain or unsure about whether your portfolio can weather market movements, give a call at 928-460-0972 and let’s chat about it.