Uncertain Times Shouldn’t Dictate Your Long-Term Investment Strategy
Recent worldwide political events could potentially alter global markets: the re-election of Prime Minister David Cameron and his promise to re-evaluate whether the U.K. should remain an EU member, the Obama Asia trade push and the rise of ISIS, just to name a few.
Unpredictable outcomes become fodder for the curious investor: “How will my foreign and U.S. investments be affected?” and “Should I be investing more or less in Europe, the U.S. and/or Asia?”
With market uncertainties, investors often begin to feel uneasy and then question where their money is and where they want their money to be. Alternatively, what you need to keep top of mind is, successful long-term investment strategies don’t involve quick and aggressive portfolio moves. Whether you have been investing for many years or you are new to the investment markets, don’t allow today’s news (whether economic or political) to affect your core investment strategy.
Trust Logical and Proven Strategies
Okay, we agree, it’s natural to focus on today’s current events—and how you may win or lose; however, today’s news is no reflection of the market. The market anticipates tomorrow. It considers and discounts all present and potential events. If a development occurs, the market reflects that information quickly (most likely before you know about the event).
Keeping a conservative attitude with your core investment assets and having well-informed decisions already in place make the best strategy. Ensure you have a solid, diversified portfolio (e.g., a mixture of foreign and U.S. stocks, bonds and alternative investments) because world and national problems will always happen, and you don’t want to be in a constant sell-and-buy mode.
Ignore Sell, Sell, Sell, and Buy, Buy, Buy
It’s tempting, especially if an event may affect your investment, to take a traders mentality. But remember, when you initially invested your money, you did so with certain objectives in mind. Short-term events shouldn’t garner ditching a well-implemented financial strategy since the event’s eventual outcome is not likely to negatively affect your investments in the long term.
Sure, frequent selling and buying may be exciting; however, it is also stressful and time consuming. If you have an advisor/broker who advises you to sell and/or buy every time an event takes place, reconsider. This behavior likely benefits them more than you. Money is made every time you buy or sell an investment, so the more frequently you buy and sell, you take the added risk while they collect the fee.
Also, when considering world events, you need to consider that all countries have differing accounting standards, currency fluctuation, and economic and political unpredictability. When a political and economic situation occurs, you don’t need to sell all your assets and buy different ones, since there are always moving pieces in place.
Today’s political and economic situations might get you thinking you need to reorganize and change your portfolio. Yet when you actually think about it, there has been and will continue to be uncertain situations. When defining an investment plan, focus on your specific objectives and bring in a team that can build and maintain a consistent plan using proven strategies.
Changes in life are inevitable, but you don’t have to (and your portfolio shouldn’t) react immediately to all of them.