Investing Can Be Soooo Scary!
27 Oct 2015
With Halloween upon us lets discuss some practical ways to make investing less scary…
- Unless you have the knowledge, desire and time (and lots of money) stay away from picking individual stocks. There are plenty of more efficient ways to invest in equities.
- Diversify, diversify, diversify. I know, sounds rhetorical, but believe it or not, American investors do very poorly at this simple concept. Studies have shown an extreme bias to American made companies and a lack of exposure that the average American investor has to international companies. Warren Buffet has been quoted as saying, “Own a little of everything (not just US Companies) all the time…”
- Use a risk level associated with declines in the markets not gains. We believe the success or failure of a financial plan is not predicated on how much you gain, but on how much you don’t loose. Studies have shown investors place more value on the pain of a loss than the joy on a gain.
- Tune out the media. I know this is very hard to do, but do you think looking at your investments every day, month or quarter will help you make better decisions? Frequent investment changes will not benefit you in the long term.
- Rebalance your investments regularly. Rebalancing is the concept of making sure your portfolio represents your original investment asset allocations. Although this does not guarantee any results or performance, it has been a concept used and discussed in the industry for a long time.
- Invest at consistent intervals. It’s not your timing of the markets that does well it’s your time IN the market as they say… Keep investing at regular intervals and when the inevitable sell-off occurs you can try to pick up some lower priced shares to add to your portfolio.
I know this can be a scary time of year but investing doesn’t have to be. Try these simple steps and you should be able to keep the “financial” ghosts and goblins out of your investment house!
Good Luck and Happy Halloween! Jeff
These are the opinions of Jeffrey Johnston and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Diversification and asset allocation strategies do not assure profit or protect against loss