Published in the Sept. 16-29, 2015 issue of Morgan Hill Life
Marisa Otto
As an investor, you may often wonder what is going on in the financial world. One day, the stock market is down 200 points; the next day, it’s up 300. One day, a scandal rocks a company; the next day, another firm declares a poor earnings report. Isn’t there any easy route for you to follow as you pursue a comfortable retirement and other key objectives?
Actually, there isn’t. But you can help smooth out your journey by following a few basic “rules of the road.’’ Here are a few to consider:
Create a plan — You can waste a lot of time, effort and money through haphazard investing. That’s why you need to create a plan that defines your long-term goals and establishes a strategy to achieve them, taking into account your tolerance for risk and time horizon.
Take action — The best plan in the world is useless unless it’s implemented. Once you’ve set a course of action, follow through. Don’t wait for the “time to be right” before you invest. The best time to get started is now.
Stay invested — When the market is “hot,” it’s easy to for people to keep investing. After all, everyone else is doing it, with apparent good results. But it takes far more courage to continue investing during a long bear market, when so many people head to the “sidelines.” And yet, it’s essential that you stay invested, through good times and bad. Ultimately, the long-term performance of the investments you have chosen will have far more impact on your portfolio’s success than the daily price fluctuations that are inevitable.
Look for quality — Persistence in investing, by itself, isn’t enough to help you reach your long-term goals. You also need to be investing in quality. Look for the stocks of companies that have solid track records, strong management teams, competitive products and well-defined business plans. Of course, you’ll experience ups and downs even in quality stocks — but if you hold them over time, you’ll increase your prospects for success.
Diversify your holdings — During any given market environment, some investments will be doing well, while others will not. You could try to pick the winners, but that’s almost impossible to do with any degree of consistency. You’ll be better off by diversifying your dollars among a wide range of high-quality stocks, bonds, mutual funds, government securities and other vehicles. By staying diversified, you’ll help cushion yourself against downturns affecting one type of investment.
Review your plan — You should review your plans and strategies at least once a year. Your life will constantly be evolving and you may need to adjust your plans to accommodate these changes. If some of your investments no longer suit your needs, you’ll need to find other opportunities
As you can see, there’s nothing magic, or even terribly complex, about any of these “rules for the road.” However, to follow these guidelines, you’ll need patience and perseverance.
Marisa Otto, CFP®, Financial Advisor, Edward Jones U.S.A., can be reached at (408) 778-4400, at [email protected] or visit www.edwardjones.com.
