When the market gets volatile (like it has been recently), that’s when people make mistakes. The most important rules of investing are to know your goals and to stick to your strategy (assuming you have a competent strategy). The fear mongering media, high-frequency traders and hapless short-timers are doing everything they can to make you second guess your strategy and deviate from your plan. Don’t let them beat you.
Here is how the media tries to hurt you…
In a nutshell, they don’t care about you or your investments. The fear-mongering media is rooting for turmoil because it’s good for their business. The more tumult, the more panicked people check the media’s click-bait websites, they more advertising dollars they receive. It’s really that simple. Don’t let the media take you off your plan. Don’t let them beat you!
Here is how the high-frequency traders hurt you…
First of all, the constant media coverage about these mysterious high-frequency traders, quant models and artificial intelligence machines—they all make the little guy think it’s easy to make lots of fast cash trading in and out of the market. It’s not. But what it does do is create more volume for the high-frequency traders to beat you. They basically poke and prod the little guy by creating senseless volatility, and then when you trade out of panic, they front run you, they get you to buy the wrong things at too high of a price, and they take the good stuff off your hands at too low of a price by causing you to sell of out fear. Don’t let them beat you. Know your goals and stick to your strategy (assuming you have a competent strategy).
What does a good investment strategy look like?
In a nutshell, a good investment strategy is basically all about having the right amount of risk versus reward in order to achieve your goals. This includes understanding how much income versus long-term growth you want/need, and balancing that against how much volatility you can psychologically handle to keep you from making silly short-term mistakes (i.e. don’t let the market beat you psychologically!) Said differently, and in a very simplistic way, a good investment strategy is basically allocating the right amount (and type) to stocks and bonds (and cash) in your investment portfolio, to meet your needs. For example, if you’re already retired, and your nest egg is already big enough, is there really any reason to invest 100% of your money in aggressive growth stocks!?
But what if my strategy is wrong?
Don’t wait to fix it! Ideally you’d have already allocated your investment portfolio prudently before this latest batch of volatility hit. But if you have too much of your nest egg invested in stocks (or too much in bonds) don’t wait to fix it. Some folks believe they can just wait for the market to recover back to where it was before they rebalance their nest egg to an appropriate mix of stocks and bonds. Wrong answer. You don’t know if the market will recover in days, weeks or years, and you can do irreparable damage to your nest egg if you wait. Don’t let the market beat you!
Our Blue Harbinger strategies include varying amounts and types of stocks and bonds in order to meet differing objectives. They all continue to deliver strong performance, and you can view our current holdings here.