There is a lot of uncertainty in the market regarding interest rates, stock market valuations, and the economy. This article from the Wall Street Journal tries to remind readers of 5 principles every investor should keep in mind: diversification, avoid emotional decision-making, recognize the market is unpredictable and be disciplined; choose low cost investments, and time in the market is more important than timing the market.
1. Diversification – spreading out your bets helps reduce risk, but it can be frustrating as some of the assets you own will be unpopular. Stay diversified as today’s losers may be tomorrow’s winners.
2. You are your own worst enemy – emotional decisions create destructive behavior, do not give in to impulse to sell when market is down as you will miss the inevitable rebound.
3. There is a price to pay – the cost to historically stellar long-term returns in the stock market is unpredictability, volatility, and unexpected downturns.
4. When in doubt, choose the investment with the lowest fee – investors’ profits will always equal the market’s returns minus all fees and expenses.
5. Time is the most powerful force in investing – wealth grows exponentially – a little at first, and then in a hurry for those who stick around the longest. Time, patience, and endurance pay off.
These are principles that we embrace on behalf of our clients.
Click HERE to read article in The Wall Street Journal