It would be ideal if investment decisions were made in a vacuum without influences from the outside world, but that is not the case. We are constantly bombarded with information from many different sources, and it impacts how we feel about our investments. So how do you control those emotions? It helps to hold on tight to a solid investment plan that looks at performance over the long term.
Here are some tips on helping you deal with the ups and downs of the market:
Know the time targets for your goals. It’s best to think of market movements in terms of your goals. If you are 30 years away from retirement, you have plenty of time for your portfolio to reach its goals. What is important is that you understand how much tolerance you have for risk and the amount of time you have in meeting your goals.
Have an investment plan. Having a plan based on your objectives and risk tolerance with an asset allocation and diversification that is aligned to your financial situation can help you deal with volatility. Additionally, you will want to stress test your plan to understand how poor market conditions can affect it. Performance modeling can bring you peace of mind knowing that you will be able to ride out a major shift or lead you to make adjustments to your plan to better meet your needs.
Keep things in perspective. Remember that the market goes in cycles. You’ll have down years, flat years, fair years, and good years. If you stress-tested your plan, it should give you peace of mind that you can make it through the hard times.
Shut down the noise. The media is looking for your attention, but if it increases your anxiety, turn it off. The key is not to let your emotions deter you from a solid investment plan. While there will still be times that you feel anxious, an investment plan can help you ride out the ups and downs of the stock market. Don’t spend your time saying what if, because you can’t
change the past. Just look forward to what your investment plan can deliver.