Whether you're a seasoned investor or new to the game, you'll want to make a conscious effort to avoid these three common investment mistakes:
Volatility in the Market is Normal: Avoid the Emotional Rollercoaster
When it comes to long-term performance, there are “3 P’s” that investors must always remember:
Look beyond this moment and stay focused on your long-term objectives.
Volatility will always be around on Wall Street, and as you invest for the long term, you must learn to tolerate it. Rocky moments, fortunately, are not the norm.
After 20 months of relative calm, this volatility needs to be taken in stride.
Finally! The market has had a pullback. But not with catastrophic results. We closed the year with the S&P at 2,673.61 on December 29, 2017. As of the close today, February 6, 2018, the S&P has closed at 2,695.14. This means that volatility is back after a 2017 that was just, well, HUGE! As I have said a million times: If nothing has changed in
Crises pass, and markets eventually regain equilibrium.
We have seen some uneasy times lately. Uneasiness impacts the financial markets. When it does, we all need to keep some long-term perspective in mind. Those who race to the sidelines and exit equities may regret the choice when crises pass.
We are certainly living in interesting times. Let’s very briefly explore some of the topics that have caused market anxiety this year.
Many clients are concerned with stock prices. Are they overvalued? Yes, by some measures. Are economic conditions not exactly inspiring? Yes again. Of course, many people had the same feeling two and three years ago. Imagine what would have happened if they converted their investments to cash and missed all of the last three stock market years.
Regardless of your age, the thought of not having to work, but still enjoying a great quality of life is probably quite appealing. Retirement sneaks up on you as each year goes by faster and faster.
I don’t spend a lot of time offering specific market commentary at Financial Planning Fort Collins. I think there are a lot of places and a lot of personalities that can offer plenty of very fine commentary for you to enjoy, if that's your thing. But when bigger picture things happen, I will try to put them into context, as much as possible.
Which segues into interest rates, and bonds. Interest rates have recently made a sharp move higher. In early May the benchmark 10-year Treasury note was at a yield of 1.66%, near the all-time lows hit in July of 2012. The difference between this year and last is that in just over a month the yield on that 10-year T-note has snapped up to around 2.20%. On a relative basis, that's a big move for the bond market - yields moved up by nearly 1/3rd in around 30 days.1