Don’t Let the Headlines Influence Your Portfolio Mix
It is almost impossible to turn on the TV, radio, or the internet without seeing financial headlines that are intended to influence investors’ portfolio decisions. As a result, it is fairly common for investors to try to “time the market” or take a tactical approach to their investment allocation, rather than demonstrating discipline by maintaining a buy-and-hold, strategic approach that involves periodic re-balancing of their portfolio. Most research suggests that the former will, in the end, lead to lower portfolio returns, as it is nearly impossible for the average investor to successfully “time the market”. Remember, in order to successfully “time the market”, you need to be right twice: both when you get out of the market, and when you get back in.
At DirectAdvisors, we continually stress the importance of designing an investment mix for your portfolio that incorporates your age, time horizon, portfolio goals, and other risk factors. Once this mix is decided upon, it is important to ignore the headlines and leave your portfolio as-is, except for periodic re-balancing (and a gradual shift to a more conservative allocation over time).
Click here to read an article by Chuck Jaffe discussing six bad reasons to make changes to your portfolio.