Regardless of the market conditions at the moment, the keys to successful investing are always the same.
I have season tickets to pro football’s New York Jets. (Yes, I know, a less than stellar year for them.) Before every game, the radio announcers tape a segment where they discuss the keys to today’s match-up. Having gone to more home games than I care to mention, I noticed one aspect of these keys.
Week to week, they adjust the order of the keys, but not the content. The Jets need to protect the quarterback (whoever it may be), run the ball and stop the run, and of course, win the turnover battle. No matter whom they are playing – the San Francisco 49ers, the New England Patriots or the Detroit Lions – the keys to winning the game are always the same.
Here are my six keys to today’s investment match-up. You may notice that they’ll be the same next year and the year after that – sort of like my loyalty to the Jets.
1. Define your long-term goals. Clarify what it is that you are trying to achieve, especially in the long run. You have to know where you want to go to plan your journey. Develop a plan to achieve these desires.
2. Avoid self-destructive behavior, such as chasing high-performing investment categories, or making major tweaks to your long-term investment plan based on current conditions. Having clarified the plan should help you keep focused on the long term.
3. Understand that crises are inevitable. As part of our on-boarding process for clients, we take them through a fire drill to show that they should expect the stock market to be volatile, and at times uncomfortably so, and what actions we take during those times. Surprise is the mother of panic.
4. Don’t attempt to time the markets. Not only is it very unlikely that you are able to do so; more importantly, it is not necessary. You can achieve the investment performance that you need to reach your goals without the risks of market timing.
5. Don’t let emotions guide your investment decisions. Work with the behavioral advisor to ensure that you make your decisions based on what’s best to achieve your plan. It is hard not to be emotional about your own money, especially during the inevitably difficult times. That is why having an independent financial advisor help guide you is important.
6. Disregard short-term predictions. Let the long-term historical record of the markets be your guide – both in short and long term. Focus your energy on developing the appropriate plan for your circumstances.
The major difference between these keys to investor success and the keys to today’s football match-up is that if the investor follows these keys they will, in fact, have a much better chance of being successful. Oh, if it was only so easy for my beloved Jets.
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