Markets have been volatile in the recent past and probably will be in the near future. During periods of market volatility, I recommend that you remember the following phrases:
- “Do not put all of your eggs in one basket.” (Various) Use asset allocation and diversification in your portfolios. To paraphrase Mark Twain, put all of your investments with one financial advisor then watch that advisor.
- “Know what you own and why you own it.” (Peter Lynch) If you bought an investment but cannot explain to yourself why it is in your portfolio, consult a financial advisor. If your advisor bought an investment but cannot explain to you why it is in your portfolio, replace your financial advisor.
- "Focus on the forest, not on a few trees.” (Various) It is not how some of your individual investments perform over the short-term that matters. It is how your investment portfolio performs over the long-term that does.
- “Look before you leap...” (Samuel Butler) During volatile markets, do not blindly jump to more conservative investments. Hurdle your fears and seek rebalancing opportunities.
- “Do not count your chickens before they hatch.” (Various) Just because an investment has done well recently, it does not mean that investment will continue to do well. Past performance does not guarantee future results, so do not chase recent returns.
- “Do not stick your head in the sand.” (Various) Keep your head up and on a swivel. Open your monthly statements and/or login to your online accounts.
Markets may react violently over short periods of time to small amounts of information. During periods of extreme short-term volatility, I recommended that you forget the following things:
- A “herd mentality”. Just because most people are doing something, it does not mean that you should do it too.
- An “action bias”. Doing something may not be a better choice than doing nothing.
- Unreasonable “loss aversion”. Remove your emotions and review your goals.
Breathe in deeply, then exhale slowly. If you are not sure that your portfolios match what you want as an investor and would like a professional to review them, please contact us.
Any opinions are those of Sean Mullervy and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Asset allocation and diversification do not guarantee a profit nor protect against loss. Rebalancing may have tax consequences.