Bad financial news abounds. Markets are falling. Analysts and experts are predicting worse to come. It’s only natural to worry about your portfolio.
But history suggests that the most damaging thing you can do in moments like these is to abandon your long-term plan.
“The stock market is designed to transfer money from the active to the patient.” Warren Buffett
Invest in probabilities, not guarantees
Investing is not for the timid. The stock market offers no guarantees. What it offers is probabilities: over long periods, markets have tended to rise, and investors who held to a sound strategy have generally been rewarded for it.
Investors who trade in and out with every headline tend to fare worse, because bumps in the road are inevitable. They are bumps, though, not the end of the road, and the task is to work through them.
The most money is made by the patient
Buffett is an active investor himself, but he understands something essential about markets. Those who stay patient tend to come out ahead, while those who panic fall by the wayside. So keep your eye on your long-term goals, and give compounding the time it needs.
Build a portfolio that cushions the dips
A diversified portfolio is your cushion against the volatility you know is coming. When you hold different asset classes, losses in one may be offset by gains in another. The ride may not always feel smooth, but your overall investment risk is lower, especially when markets turn rough.
Corrections are an opportunity
Market downturns, while unsettling, are natural moments to rebalance. When stocks fall, rebalancing guides you to sell some of what has held steady and buy more equities at lower prices.
“Be fearful when others are greedy, and greedy when others are fearful.” Warren Buffett
While others are selling in a panic, a systematic approach has you buying at a discount, without having to pick individual stocks. It keeps your portfolio at its target allocation and positions it to participate when markets recover.
History favors those who sit still
Market corrections are a regular feature of investing, not a rare event. Many have reversed within months, though some have taken a good deal longer.
Consider early 2020. When COVID struck, the S&P 500 fell by more than 30% in a matter of weeks. An investor who sold near the bottom locked in that loss. An investor in an S&P 500 index fund who simply held on was back to even by August.
Trust your financial plan
It’s easy to be shaken by doomsday headlines. But your financial plan was designed with the long haul in mind, and it already assumes that difficult stretches will come. As long as emotion doesn’t take the wheel, the plan can do the work it was built to do.
It isn’t about timing the market. It’s about time in the market. Stay patient, stay diversified, and stay the course.
If you’re feeling uncertain and wondering whether your plan needs adjusting, please get in touch. I’m glad to talk it through.
Disclosure: This material is for informational purposes only and does not constitute investment advice. Investing involves risk, including loss of principal. Diversification and rebalancing do not ensure a profit or protect against loss. Past performance is not indicative of future results. Index returns are shown for illustration; it is not possible to invest directly in an index. Consult a qualified professional before making financial decisions. Kiaros Advisors is a registered investment advisor; registration does not imply a certain level of skill or expertise.