Stick to Your Investing Guns

What does it take to be a successful investor? Having an investment strategy and sticking to it no matter how the markets are behaving can help you reach your goals. Here’s what to consider.

Think Long Term

You may be investing for goals that are many years in the future, so your investment strategy should reflect your time frame and risk tolerance. Think about what you’re investing for and the types of investments that have the potential to earn returns that can help get you there.

Design a Plan

Creating a plan that reflects your investment goals should help you stay invested during market ups and downs. When you have a diversified mix of stocks, bonds, and cash, you may be less inclined to make sudden portfolio changes during periods of high volatility.

Maintain Your Mix

Once you have a plan, be cautious about making impulsive changes to your asset allocation. For example, when stock values are up, you might be tempted to invest more aggressively; when values are down, you may want to take refuge in more conservative investments. But you chose your asset allocation to match your investment time horizon and risk tolerance. So, unless these have changed, you’ll generally want to maintain the asset mix you originally selected.

Stay the Course

As a long-term investor, you should resist changing investments based only on what the markets are doing at the moment. But do check investment performance at least annually, and rebalance your portfolio when your asset allocation has shifted from the targets you set when you created your strategy.

*Diversification does not ensure a profit or protect against loss in a declining market.

**Rebalancing a portfolio may create a taxable event if done outside a retirement account.