What to Do Now
The pandemic continues, the economy is still struggling to get momentum, the market appears to be faltering, and the election – oh my, the election!
These are just a taste of the uncertainties in which we live. These uncertainties are in the forefront, and don’t seem to be going away any time soon.
But this is the way it always is… uncertainties are always there.
When the market goes up, there are investors that want to get out for fear that it has reached at top and is about to crater.
When the market is going down, there are investors that want to get out for fear that it is going down further and will not come back.
Both take the wait and see approach. Psychologists do not call this procrastination. They identify it as rationalization.
What is really going on in both cases, is that the investor is taking unspoken, hidden, or even talked about fears, and creating practical reasons to run and hide.
If stocks do indeed go lower, in either case the investor is gratified and often takes an ‘I told you so’ position.
If stocks go up, they speak of it as a bear market rally that should not have been.
At the extreme of this behavior is the investor that is wrong for too long after getting out of the market, while the market rallies to new highs and then can’t resist but get back in out of FOMO (fear of missing out).
Playing this timing game requires two crystal ball-like brilliant decisions. The first is to perfectly time the upside. The second is to perfectly time the downside.
Not only does this investor have to be brilliantly perfect, he/she also has to have iron-clad emotions, making no decisions out of any feelings of fear or greed.
Consider doing this instead…
Have a personalized income plan. If you are still working, your income plan is to live within your means and execute dollar cost average saving and investing.
If you are nearing retirement, or already in retirement, you need to have an income plan that demonstrates exactly where your money is going to come from each year in order to keep your desired lifestyle WITHOUT needing to pull from equities.
Recognize that stocks are not necessarily correctly priced at any given time. The markets are not efficient, and all that can be known about equities is not known and not represented in the price of the stocks – contrary to the efficient market theory.
At any given time, stocks can be worth more or less than their current price on any given day. And in the short-term this makes mis-pricing and volatility a natural part of equity investing.
Stay invested for the long-term. Staying in the market through the ups and downs allows you to not miss out on the best days, weeks, and months of market returns. Missing the best days can cause significant under performance which can mean putting your future lifestyle at risk.
Most importantly, own quality businesses. Every business is NOT created the same. There are some that are more quality with sustainable competitive advantage that gives them a benefit over their competition. These businesses tend to weather the ups and downs of the market better than their non-quality peers.
How is your income plan working for you?
Learn how you may be able to get it reviewed for FREE as a part of a 17-Point Retirement Analysis. Click Here to request a 22-Minute Retirement Success Conversation to learn more.
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”