Staying on Track
A long-term approach to investing is the best way to meet your financial goals.
Experience has shown that sticking to your long-term plan is the surest route to meeting your financial goals. Major economic and political events come and go, and may have an immediate impact -- positive or negative -- on the markets and your portfolio. While it can be difficult to resist the temptation to react with the crowd -- the benefits of long-term investing are real.
As you have heard before, it is extremely difficult, if not impossible, to time the market. No one knows exactly when the market is going to make a significant move up or down. Similarly, trying to anticipate the market impact of a major political or economic announcement can be very damaging to an investment portfolio.
For example, investors became worried when markets fell sharply in the wake of the U.K.’s unexpected “Brexit” vote to leave the European Union. For many, there was a strong tendency to want to sell into the falling market in an attempt to prevent what they believed would be deeper, lasting losses. But as we saw, it didn’t take long for markets to recover.
Someone who sold into the falling market, only to re-enter the market after it recovered, would have been selling low and buying high. By contrast, an investor with a long-term approach would have had fewer losses with stronger gains from the markets’ recovery.
By staying invested, you’ll weather the periodic dips the markets go through from time to time.
Just as important as staying focused on the long-term is ensuring that you not consider your portfolio as a funding source for current spending needs. Withdrawals can trigger adverse tax consequences; they can also create a “one step forward, two steps back” effect on your portfolio’s balance.
A word about compounding and dividends…
Whether you own individual stocks or own equity mutual funds, growth of stock price and reinvested dividends can help to boost performance year-over-year. Constant buying and selling can put a damper on that momentum.
Bottom line, the most successful investors are the ones who are focused on building their wealth over the long haul -- just like you.
Contact our office today and we can discuss staying focused as well as the benefits of long-term investing.