Most stock market investors, whether it’s in their 401(k) or taxable investment account, are looking for the same result: strong and steady gains over time.
However, many investors can let emotions influence their investment decisions at the worst possible time; like selling equities and going to cash in March of 2020 when the global stock market temporarily declined 35 percent. When confronted with any adverse market event I have four suggestions for you to survive market turbulence.
Utilize a Fiduciary Financial Advisor
Not all financial advisors are fiduciaries, but those who are have a duty of loyalty to their client to provide unbiased investment advice. A good advisor will earn their keep if they help you take the emotion out of investing. They can prevent you from making investment decisions that could threaten your long-term objectives.
Stay Diversified
Nobel Prize winning investment science teaches us that the risk (volatility) of an investment portfolio can be reduced, and long-term returns increased, the more you diversify. Studies show that most investors, even those invested in mutual funds, are not sufficiently diversified. A truly diversified investment portfolio will hold between 8,000 and 12,000 different securities across all asset classes.
Stop Watching the Financial Media
Turn off Jim Cramer and cancel your subscription to Money magazine. Tune out any financial expert who claims to be able to predict moves in the market, or who says they can identify the next hot stock. The goal of the financial media is to sell advertising and their advice can be lethal to your financial goals.
Keep a Long-Term Perspective
An average of 49 percent of all stock market trading days are negative and 51 percent are positive. Your investment time horizon and your financial goals should dictate your investment allocation — not what happens in the market next week, next month, or even next year.
Scott Johnson is the CEO of DecisionPoint Financial, LLC. He is a CERTIFIED FINANCIAL PLANNER™ and an Accredited Investment Fiduciary. He and his firm provide comprehensive financial planning and investment management services to individuals and institutions. Scott can be reached at (480) 553-6249 or scott@dpplanners.com. Visit decisionpointfinancial.com.
DecisionPoint Financial, LLC is a Registered Investment Advisor. All investments involve risk. Risks associated with investing in securities include increased volatility and loss of principal. Past performance is no guarantee of future results. The information herein is educational in nature and does not represent investment advice. All rights reserved. DecisionPoint Financial, LLC © 2021.