We all know investing your hard earned money in the stock market can be a daunting experience. Let alone a stressful one for the most experienced investors. This stress stemming from short term market volatility. Unpredictable economic forecasts and conditions. And highly credited financial experts constantly contradicting each other on topics such as stock market direction or which asset class will perform best in 2015.
So, in light of this. I have put together some advice in an effort to improve your investing experience and your investment returns.
Tune Out The Chaos
It is important to remember that the investment portfolio you construct should be designed for the long term and not to meet your financial requirements within the next couple weeks or months. Keeping this in mind, you should not be worried about what the experts who are all impressively credentialed are nattering about each day. Because often this nattering is entirely based on increasing ratings for the broadcasting company.
To reinforce the point of tuning out the chaos. Search the web for what the financial experts were predicting for 2014 and see how much or how little came true.
Don’t Doubt Yourself
If you have done your research. Your investment portfolio is adequately diversified with asset classes that are not highly correlated (meaning they will move up or down in value independently of one another). Then stay the course and stick with your investment plan regardless of short term market conditions.
Jumping in and out of the market due to short term market fluctuations is a sure fire way to diminish your long term investment returns. Not only will your investment returns be diminished through missed investment opportunities. But also trading fees incurred, due to buying and selling assets.
Investing your money when available and staying invested in the market will enable you to avoid playing “Shoulda, Woulda, Coulda” which is a proven way to drive yourself crazy and distract you from your long term investment plan.
Realize You Can’t Time The Market
It is staggering how many times I have heard friends and coworkers talk about how they have lost money in the stock market. All because when times were tough they panic and sell their investments only to buy back in when the market was soaring upwards.
If you are one of the investors who panics when the market crashes. Try to remember a quote from one of the greatest investors in our life time Warren Buffet “Be fearful when others are greedy and be greedy when other are fearful”. Remembering this quote will hopefully realign your thinking from selling to buying as the asset classes you are invested in have now went on sale.
The best way to dramatically improve your long term investing results when the market crashes it to stay invested and buying more assets while they are on sale.
The best long-term strategy for investing regardless of market conditions is to simply invest new money whenever you have it and keep your investment portfolio invested in the market at all times.
Remember That Personal Finance Is Personal
Everyone will have his or her personal opinions on personal finance and investing. If you have determined an investment plan within your risk tolerance that enables you to meet your investment goals. Then stick to your investment plan. Regardless, of whether you prefer to invest in Mutual Funds watch your management expense fees, Dividend Income Investing, Index Fund Investing, or bars of gold if it meets your investment and retirement needs.
Do what works for you and enables you to meet your long term investment goals.
Remember that short term market fluctuations and major market corrections happen. It’s not a matter of if. It’s when it will happen. As disheartening as it is to invest your money only to experience it lose value the next day because the market drops. It is important to realize that you can’t evaluate a long term decision based on short-term results.
Lastly, success when it comes to investing is not about being the greatest investor, striving to beat the benchmark, or creating an investment portfolio with higher returns than your friends investment portfolio. Success is achieving what you have worked so hard for by saving your money. Whether this achievement means reaching financial independence, saving enough cash for a home down payment, or enough money to travel.
Hopefully this advice will improve your investing experience and returns along your investing journey. If you have any further investing advice let me know in the comments!