However, never forget that volatility is driven by emotional buying and selling, and investors (not traders), like myself, don’t let our emotions determine our long-term investment strategy for retirement. Part of the reason our clients hire us is to keep their emotions in check, so that they don’t get off of the roller coaster before it comes to a complete stop. The complete stop is when you’re ready to stop investing in the wealth generating tool that is capitalism. Are you at that point today?
Long-term is key here, because today’s wild volatility is still only one day of stock market movement. The stock market is very volatile, but over its extended history it has only moved in one direction – up.
Down markets present opportunities for you to lend your money to capitalism at lower prices than you were previously lending money to it. This isn’t bad news, this is great news. So look at market sell offs or extended periods of down markets, known as bear markets, as great opportunities to buy great companies at great prices. Therefore, we use these times to rebalance our portfolios where we sell some investments and buy others. Over time rebalancing actually gets us to ‘sell high’ and ‘buy low’ which has proven to be a great long-term wealth building strategy.
As for me, I personally feel no different about my retirement portfolio today than I did yesterday because I’m keeping my emotions in check and not letting their short-term effects on me determine my long-term strategy. And I make sure my clients feel the same way.
I’ve come across this great quote several times and from several different people so I don’t know who to credit with it: “I don’t (and no one else knows either ) whether the next 10% move in the market will be up or down, but I can tell you the next 100% market move will be up.” For clients of Pensinger Financial it is our goal to make sure they participate in the next 100% move up, all we ask is that they ride out the 10% (and more) up and down swings with us and don’t let their short-term emotions cause them long-term harm.