1. Focus on what you can control
Market movements, business decisions, economic events, politics, interest rates—many factors can influence the performance of your investments. Instead of worrying about events that are out of your hands, focus on what’s within your control.
2. Put time on your side
Financial markets have rewarded long-term investors. Compound growth may help bring about higher returns over time. Keep in mind, however, that past performance does not guarantee future results.
3. Tune out the noise
News cycles driven by fear, uncertainty, and doubt can challenge even the most disciplined investor. Some headlines spark anxiety, while others try to goad you into chasing the hottest fads and trends. Although we live in an era of seemingly infinite data, information overload can cause you to (perhaps unwisely) reconsider investment decisions.
4. Don’t try to time the market
Market timing is the strategy of trying to predict future market movements to time buying and selling decisions. When markets are rallying or pulling back, it can be very tempting to try to seek out the top for selling or the bottom for buying. The problem is that investors usually guess wrong, missing out on the best market days. Another approach is to focus on time in the market, which may let you ride out the natural market cycles and focus on your long-term goals.
5. Understand risk
Market risk—or the risk of your portfolio losing value due to factors such as changing market conditions—isn’t the only type of risk to be concerned about. Personal risks, such as longer lifespans and rising health care costs, mean that you need to consider a variety of factors as you prepare for retirement. Understanding risk as it relates to your time horizon and investing goals is critical to a financial strategy.
6. Avoid the emotional roller coaster
Emotional decision making can lead to the wrong decision at the wrong time. A DALBAR study found that while the S&P 500 returned 6.06% for the 20-year period ending in 2019, the average investor fared worse, seeing a return of only 4.25% during the same period. Emotional decision making was one of the factors that contributed to the difference in performance.1
7. Don’t procrastinate
The sooner you begin investing, the longer your money can work for you. Let’s look at two hypothetical investors, Jack and Jill. When Jill turns 50, she starts contributing $25,000 a year to an account that earns a hypothetical 6%. After 10 years, she stops making payments. Jack puts off his investing program. At age 60, he begins putting $25,000 a year into an account that earns a hypothetical 6%. Though both have contributed equal amounts, Jill has the magic of compound interest working for her. When they both reach age 70, Jill’s account balance is nearly twice the size of Jack’s.2 Learn how compound interest may help you save more over time.
8. Delegate the details
The financial professionals at Member Benefits can help you create a customized portfolio strategy that’s built around your unique goals. Although we can’t control markets, we can help you use them to pursue your long-term financial goals. Contact us for an appointment.