Investing is always difficult. Even during robust bull markets it takes both courage and fortitude to succeed. Either you sell your best investments far too early justifying it with that worn out cliche “you can’t go broke taking a profit,” or you just can’t bring yourself to allocate enough money to stocks to begin with. Then, to add insult to injury, you increase that allocation when prices have peaked. The loss on those funds then impede the overall progress of you portfolio. And this can happen to an investor when times are good.
As of late, financial markets around the world have been going through a rough patch, a correction, yes, a good old fashion beat down. Yield on quality bonds are ridiculously low. Volatility in stocks is ridiculously high. How should the prudent investor position his/her mind and assets at a time like this? Well, if I knew for certain I would just tell you and we would all be rich by Monday. What I can do though is share with you my own practical ideas when the enjoyment of investing takes a holiday.
This has been and still is the first rule of investing. It is the cornerstone of planning. It is that which will keep you grounded. No one can guarantee success to you, but you can sabotage years and years of hard work with one mistake – over concentration. Don’t do it. Let me repeat myself on this one. Don’t do it.
- Stay in touch but don’t obsess
Life skills are achieved when purposefully sought and pursued. They do not materialize out of nowhere. Achieving the right balance between being a good steward of money and obsessing over your funds will dictate how you live the rest of your life. You truly need to get this one right for if you do these skills will carry over to the other major areas of life. Keep up with your investments but don’t allow them to occupy center stage. By all means do not look at your portfolio every day. (Unless you are paid to, like me.)
- Look for opportunities
Due to our genetic makeup we are prone to fear loss over two times more intensely than we enjoy making money. What a shame and handicap. Don’t allow yourself to only see the setbacks in the financial markets as bad news. To date, every finance correction in the US capital markets has presented attractive investing opportunities. I have faith that this one will as well.
- Educate yourself enough to trust the future
I am a firm believer in knowing the past. History provides insight, context and understanding. Financial history does the same. Knowing how capital has multiplied and how profits on capital has grown exponentially in this grand experiment we label capitalism can serve you well. For example, knowing just how consistent US businesses have generated attractive profit margins decade after decade leads me to trust that this will continue for years to come. That sure is comforting when the news of today might not be so good.
Mike Jones is Managing Director / Investment Group of Argent Advisors, Inc. Write to either at 500 East Reynolds Drive, Ruston, LA 71270 or call (318) 251-5800. This newsletter is available via email on a free subscription basis. You can subscribe by clicking here. Direct any questions, comments or suggestions to Byron Moore at firstname.lastname@example.org or to Mike Jones at email@example.com.
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