~A journey of a thousand miles begins with one step~ Lao Tzu
If you fell asleep at the market height in February and woke up this week – in spite of the major decline starting in March, you may find that you're in positive territory with your equity-based portfolio. Hence, the truisms: declines are temporary, advances are permanent, this too shall pass....
The markets, like life itself is full of ups and downs. The key is to experience both and have faith that the tough times will pass and greener pastures will be in the horizon. Easier said than done of course, as human beings- we are hard wired to avoid adversity and tend to be risk averse in general.
As my mother always told me: “Nothing good or worthwhile in life comes easy” It’s not easy experiencing portfolio declines, but we must. We must because they are temporary, and they do pass – if we let them. We need to remember that when the market declines, there is a sale, and the savvy investor considers buying when the market is on sale.
One way that one can easily participate in the ebbs and flows of the market naturally is by dollar cost averaging.* It is a strategy designed to help increase your portfolio at all times of the market cycles. By simply accepting the fact that markets are dynamic, and go up over time, this strategy allows you to invest in your portfolio effortlessly at these various price points.
It is also perfectly acceptable to invest when we are simply ready and able. It is not necessary to time the allocation of capital into the markets. If the approach is long term (five years+) that capital deployed in a diversified portfolio, has the potential to grow when dividends/capital gains are reinvested.
Much of the challenge of being a long-term investor is behavioral. This is where having a financial coach in your corner is invaluable to succeeding and reaching your goals. Having a plan to meet your goals will give you clarity and confidence. It can help eliminate indecision, fear and doubt. Knowing what your number is, adds to this clarity and is what the plan revolves around as well.
Staying the course through market downturns is imperative. If you need help with this, or would like to review your plan/goals, let us know- we are here for you.
*Systemic investment plans (dollar-cost averaging) do not assure a profit or protect against a loss in declining markets and there is no guarantee that any investing goal will be met.