All of the excess daily noise notwithstanding, your ability to achieve financial goals boils down to two things: The first, can you accept normal market swings?; The second, can you stay invested in order to participate in long-term returns?
Almost everyone says yes to these two questions without examining what “normal” really means. In the average year, the broad stock market, (S&P 500), declines at some point during the year by about 14%. Yep, move along, nothing to see here. Moreover, about every six or seven years, the decline is roughly double that (25%+). Despite “normal” declines, the S&P 500 is positive in about 75% of the calendar years since 1980. You need to be able to “stay in your seat” when these inevitable twists and turns occur in order to fund long-term personal goals.
Being able to withstand temporary setbacks is at the core of becoming a long-term investor. One of the main obstacles, however, is trying to attach reasons for normal market swings to some particular “current event”. As the averages attest, no reasons or explanations are needed…stock prices change every day. Prices are a reliable indicator of what market participants, in aggregate, think about value that particular day. Stock prices reflect both current knowledge and future expectations.
As long as you anticipate “normal”, you are likely to withstand the temptation to bail out of stocks at the first sign of trouble. Make this part of your mental preparation for the future.
Does Your Money Intention Match Your Money Attention?
The 10 Advantages of Becoming More Emotionally Intelligent
A Tool That Helps Prepare Vets for Civilian Employment
The One Behavior to Make a Difference in the Ability to Impact the Lives of Others
8 Tips for Delivering Your Portfolio Manager Commentaries Faster
Who Are You Serving?
Your To-Do List Won’t Suffer When You Do This Too
How to Budget for the Holidays
2019 Will Be a Pivotal Year for Asset Managers
An Employee Advocacy Program Can Make Your Content Go Viral
Equities16 hours ago
These Oil Stocks Are Ticking Time Bombs
Building Smarter Portfolios16 hours ago
The Market’s Wild Ride
Human Performance16 hours ago
5 Simple Ways to Improve Your Productivity At Work
Equities2 days ago
Bubble, Meet Pin; It’s Just the Beginning of the Downslide
Market Strategist2 days ago
Don’t Be Boxed Into Style Boxes
Development2 days ago
As an Advisor, Are You “The Great Communicator?”
Equities3 days ago
This Is the End of Trump’s Economic Sugar High
Development3 days ago
When You Cannot Think of a Better Way to Market Yourself, Try This…