Should We Get Out Of The Market Until Things Settle Down?
With the 24 hour news cycle constantly giving us negative news about literally any and everything, it's a wonder that any of us remain faithful about investing, the economy and the markets in general.
*Remember the media sells headlines not history
So if you know there is going to be a recession, a correction, or a bear market, shouldn't you get out until things settle down? The short answer is no because the market cannot be timed despite what you may have heard to the contrary.
The long answer is that getting out and waiting to see what happens leads to far worse long term returns than does riding out a temporary decline because the market cannot be timed. The only certain way to capture long term market returns is to also be willing to ride out temporary declines.
But the media experts are telling us that a market correction is near
They are always saying that. They always have and always will. And maybe this time they are right, however, no one is consistently right about these predictions. And it's impossible to craft a long-term, goal-focused investment strategy on predictions. Thus, it's completely irrelevant to a long term investment strategy.
The impulse to get out of the market before something bad happens is an impulse in all of us but it's at best only half of a strategy. What impulse would you listen to for re-entry to the market? Impulses don't make a strategy, but they can totally destroy a strategy.
The impulse to get out of the market before something bad happens is an impulse in all of us but it's at best only half of a strategy. What impulse would you listen to for re-entry to the market? Impulses don't make a strategy, but they can totally destroy a strategy.
Our investment strategy
At 80/20 Financial Services, our investment strategy is based on the premise that we know markets can't be timed so we make no effort to try and time them.
We identify your income goals, craft a plan to achieve them, and then we build an investment portfolio to fund them. Goals, plan, portfolio always in that order. And we always keep 2-10 years of cash on hand to weather any storms. We know at some point the storms will come so we prepare for that.
Once that long term plan is in motion we only adjust when absolutely necessary. We act. We don't react.
We invest your money and our own money in the best companies in the United States and the world. We don't base our investment philosophy on the latest fads nor do we change our philosophy based on the latest fears.
We don't believe in creating wealth quickly, we believe in creating wealth for certain.
We believe long term investment success is much more about investor behavior than investment performance.
If we act on a plan then performance is inevitable. If we fail to act on our plan and react with emotion then failure is inevitable.
Conclusion
I want you to think about this long and hard. We have the most powerful computers in the world today and not one of them can predict market volatility. Not one. Why do you think that is? Because there is no calculation for human emotion. And human emotion is what determines your long term success as an investor.
So when media, tells you the next recession is near tune it out. It doesn't gain you anything and it takes your focus off what really matters. The single most important thing we can do is act continuously on our income and investment plan while we ignore the financial media and all the other "experts."
You Need A Plan
A goal of retiring - without a plan - is simply a plan to run out of money. At 80/20 Financial Services we work to insure the money you need in the early years of retirement is safe and not subject to temporary market fluctuations, while at the same time putting the money you'll need in the later years of retirement in a position to receive the long term market returns necessary to provide an income that increases and outpaces inflation.
For more articles about retirement planning and investing click here.
Brian Coleman/Electric Cooperative Retirement Specialist
80/20 Financial Services is an Independent Registered Investment Advisor (RIA) registered in the state of Missouri (CRD# 300772). Being independent allows us to work exclusively for YOU.
80/20 Financial Services is the legal name of our Registered Investment Advisory Firm (RIA). Electric Cooperative Retirement Planning is what we do.
There are different types of "financial advisors". We recommend you work with an Registered Investment Advisor (RIA). It doesn't have to be us. Read more about the different types of advisors here.
Our specialty is retirement planning for electric cooperative employees within 5 years of retirement or already retired.
*We will also work with the families of cooperative employees.
Our mission is to make sure you never lose your purchasing power in retirement.
Notice we said purchasing power instead of money. The biggest misconception that we see when talking to clients and prospective clients about retirement planning is they look at money as a principal amount rather than purchasing power.
Photo by Nattakorn Maneerat
