The market once again has hit an all time high. That’s good, right? But, oddly enough, I sense some skepticism in the air. Can the market sustain these values? Will the impeachment proceedings harm our economy? From other angles I hear the economy is strong and has room to move ahead. It just depends who you listen to. The political landscape is sad. The democrats this or the republicans that!!!
With the market at an all-time high, it’s important to understand the value of an opinion…or how little someone’s opinion may really have on reality. Depending on what station you tune into with your morning coffee, you might be led to believe our country is being run into the ground. Another station may state we are stronger than ever. Most of this is all conjecture, and, while it’s fine to pick a side and stand firm letting your moral compass guide you, letting the talking heads guide your financial and investment decisions can be a bad move.
Why? Because the conversations we hear that light a fire in us are usually driven by emotion, and making financial and investment decisions based on emotion is a recipe for pain. Fear and greed are two emotions that should not be the guideposts for financial success. Again, depending on what messages you hear in your circle (the market is about to collapse, so sell everything or the rally has just begun, so buy more) should not be the needle mover to investment decisions. You see, fear and greed are dangerous when it comes to investing.
What to do?
We should establish our plan based on prudence and care and stick to it! Let your investment allocation (the allocation of equities vs interest earning assets) be your guidepost and not your emotions. When the market leads your portfolio to be equity heavy, rebalance and add more interest earning (bond type) assets. When the equity markets slide down and pulls your equity mix too low, rebalance and buy more equities. When we listen to the noise and attempt to time the market because of what we think might happen we open a dangerous door: a door that for most people does not lead to financial success. Think back 3-4 years ago and remember what the buzz was around the market. People were saying things were tenuous and the market was due a correction. What would have happened if you would have listened to those “opinions”? If you listen to your “plan” and let your portfolio allocation be your guidepost, while investing for the long run, you can tune out the noise. If you’re anything like me, you will enjoy the peace and quiet.