How does one remain patient and avoid reacting as the markets zig and zag? It’s human nature to want to take charge and influence as many outcomes as possible. This is especially true (and magnified) when it comes to managing our investments. We wish to be right in justifying decisions and outcomes, both in our head and on paper. Consider the choices some investors are contemplating today.
Many have excess cash and are trying to time their way into the market. Bond investors are watching yields get closer to 3 percent, it’s been a while since we’ve seen this. Meanwhile in the equity market, liquidations persist as some investors sell companies in exchange for cash.
It’s important to recognize the fatigue and exhaustion that is weighing on all investors regardless of what approach they take. It’s ok to be tired given the roller coaster of life and market movements the past two years. Markets crave certainty and we live in a very uncertain world. Moving in and out of investments may feel like the right move in the sense that acting is better than doing nothing. Unfortunately, this is not productive to building and expanding an investor’s wealth. What is?
Several thoughts come to mind, first is mindset. The successful long-term investor is an optimist. They believe that the market fairly prices companies and that overtime these companies will generate profits and expand in value. Ownership in companies is a distinguishing element when compared to lending to them. Accepting the truth that what expands must contract, often without reason or explanation. No surprises or reactions when markets decline as that’s what they do. This too shall pass and in the long run an investor’s good temperament will be rewarded. Sure, they’re real people not robots, they have doubts at times. What makes these investors different is their outlook and the beliefs they carry in things they don’t control.
Second is a roadmap that gets each investor closer to what they want. Roadmaps are unique as not everyone is traveling to the same destination. An investor must consider their own priorities, goals, and timeline in creating their map. It is never perfect, nor was it designed to be. Room for mistakes and changes in direction should be factored in. For those investors who haven’t created clarity on exactly what they want, investing will remain a challenge. The first step before cash leaves an account should be a very clear picture on what the investor most wants to accomplish. More is vague and not a sufficient answer when creating your map.
Maps often include both short- and long-term goals. Paying for a summer vacation, getting the kids in camps, and preparing to drop your student off on campus have near term financial obligations. The desire to be work optional and control more of your time requires looking further into the future. Goals with different time horizons may direct what dollars go where. An investor must remain flexible and understand that just because they have a goal doesn’t mean it will be achieved in the desired timeframe. So many things in life often arrive earlier or later then intended. The ability to remain flexible is paramount. This is represented by cash reserves and includes time to reflect on your current direction.
Finally, having a professional guide available to chat with as you progress on your journey makes a difference. Sure, you could travel years successfully on your own and be quite content. Though one day will arrive, it always does, when outside direction and perspective are valuable. Knowing exactly what route to take and avoiding the mistake allows the investor to make the most of their journey. Detours and short cuts often appear, and it may be tempting for the investor to adjust their course. A seasoned guide knows that not all roads connect, and dead ends are to be avoided. The correct path is not always the easiest choice, that’s difficult for the investor to see at times. A relationship build on mutual trust between investor and guide makes the most out of the inevitable “forks in the road”.
Need a roadmap or new guide? Lost your map and curious about creating a new one? Currently completely lost and need to phone a friend? That’s what we’re here for, give us a shout below!