presented by Doble LeBranti Financial Group
Are market swings causing you anxiety? These four money mantras can help you overcome it.
Whether it’s the ongoing Covid-19 pandemic; a sudden boost in prices related to gas, food, housing, and other essentials; supply chain hiccups; or an uncertain labor market, the stock market has seen plenty of ups and downs over the past six months. As always, it’s impossible to predict what the market will do on any given day, but it’s always a good idea to take deep, measured breaths and focus on basic money mantras. Doing so can help you push through any anxiety you may feel regarding your retirement account (no yoga pose required).
Mantra No. 1: I Am Investing for the Long Term
Saving for retirement is a journey, not a sprint, but a volatile market can push even the most experienced investors into making emotional decisions. It’s never a good idea to change your investments simply because of day-to-day volatility. Set a strategy that’s right for you and stick to it. Having a diversified portfolio can help you build confidence in your long-term plan—so don’t just throw it out the window during big market swings!
Historically, equity markets have trended upward over the long term. Past performance, however, is not a guarantee of future results. Investing involves risk, so you may want to consider working with a financial professional who can help you review your tolerance for risk while keeping in mind your other financial goals.
Mantra No. 2: I Will Diversify My Portfolio
Putting your money into a number of investment options that include different types of asset classes can help reduce risk. Generally speaking, if your dollars are invested in materially different types of investments (e.g., stocks, bonds, and cash) and market conditions cause one of your investments to decline, all of your money shouldn’t be affected. A simpler way to understand diversification is to look at the food you put on your plate. The more food groups on your plate, the more nutrients your body consumes and the healthier you are. If, however, you only ate pizza every day, your body would suffer from poor nutrition. The same is true for an investment portfolio’s diversification. Investors who put their money in only one type of asset (e.g., stocks) are at an increased risk for loss of principal because their portfolio isn’t diversified.
Mantra No. 3: I Will Rebalance My Portfolio on a Regular Basis
Over time, market changes can lead to shifts in your portfolio’s asset allocation. You may have started with a 75/25 stock-fund-to-bond-fund split, for example, but changes in the market caused stocks to now account for 85 percent of your portfolio’s value. That’s why it’s important to periodically check your asset allocation to ensure that it aligns with your strategy and risk tolerance. Keep in mind that you may also want to rebalance to a more aggressive or conservative allocation should your tolerance for risk change, perhaps because of how close you are to retirement.
Mantra No. 4: I Will Seek Professional Help If I Need It
Many people consult with an investment advisor for guidance regarding retirement plan investments. An advisor can help you determine whether an investment strategy is appropriate to achieve your financial goals based on your risk tolerance and time frame.