Unless you have been living under a rock these past few weeks you have noticed the major swings in the equity markets. If it isn’t the news about Greece, it was the slump in oil prices or the economic slowdown worries of China. You can list more too. There aren’t very many rays of sunshine out there right now. As an investor, what are you to do? Over my 22 years in the business here is what I have learned.
I have yet to see someone who panicked benefit from that moment of panic. If you keep emotion out of your investing decisions you would be hard pressed to make a poor decision. It is your money so I know it is hard to keep emotions out of it but if you can, that goes a long way to making sure you don’t panic.
Don’t have all your money in Canadian Equity or Global Bonds. Have your investment fingers in all aspects of the investment pie. Make sure you own some bonds, some Blue Chip equities, Europe, USA etc. By diversifying via geography and/or sector for example you will have money in areas that will be performing well. You will also have money in areas that won’t be performing great right at that moment but they will at some point.
Have a plan
If you have a plan on why you are investing, a purpose for your money then you will the proper vision for your money. We preach long term vision but sometimes we are investing for the short term and with that in mind we would invest our money properly. A written plan, have something down on paper that shows what you are investing for and why will also go a long way to successful investing.
Be realistic with your return assumptions
Have realistic expectations on what kind of returns you will get on your investment. If your expectations are way out of whack to what you will most likely get in return, you will always be disappointed. It will never be good enough.
Rebalance your portfolio
Don’t get greedy. Re balance your portfolio. Take some profit and move it somewhere safe. Purchase equities when they are down from a cash position. If you never re balance and the market corrects then that profit that you could have had will be gone. There is nothing wrong with taking a profit and keeping it.
Review your portfolio
Review your portfolio regularly. Review with your Advisor or review it yourself if you are a do it yourself person. Do not ignore your portfolio no matter how much money is in there. It is your money so take it serious.
These are just a few of the things that I have seen successful investors do that unsuccessful investors don’t do. They are simple yet effective. Saving is hard, spending is easy. Saving requires sacrifice for the future. Saving is discipline and discipline is hard. Stay focused, do not listen to the white noise out there. There are no experts out there when it comes to the market. If any of us were experts we wouldn’t need clients, we wouldn’t need to work and we wouldn’t give our secrets away. Put your money away, have a plan and don’t panic.