INVESTMENT

Ways to keep the market uncertain in perspective


It seems that the headlines are announcing an all-time high in the market these days. Although it is important to celebrate good days when they are celebrated, not every day is going well. And that’s okay.

When it comes to investing, I think the biggest elephant in the room is the word “uncertainty”. No one can say for sure what the markets will do and there is no crystal ball that will show you the results of any situation. So Embrace uncertainty. It’s not going anywhere. Focus on what you can control and how you can control yourself when something unexpected happens. In this article, I will discuss things to help maintain the outlook through market uncertainty.

Consider the market information you receive (and act)

Start by evaluating the information you receive regularly and how it affects your daily decisions. Much of today’s information, even what we consider to be “trusted sources,” is somehow shared. Often, this purpose is intended to invalidate an emotional response and trigger a fight-or-flight instinct. As much as you can try to be objective and neutral with what you are reading, it can prove to be a Herculean work.

Think about the areas of influence in your life. Beyond family, friends, and colleagues, you probably have other sources of information, such as social media, email, or news stories. Everyone’s inner circle may be different, but even your friends ’captivating titles may be less chaotic than the articles you see lining up your feed. So how do you decide which ones are worth listening to and which ones are worth acting on?

First, you want to get to the information that you are getting for the purpose. Don’t be afraid to ask yourself some difficult questions such as:

  • What is the purpose of this information?
  • Is this information to inform me or to generate feedback?
  • Does this information change my view of what’s going on in the market?

Second, try to find a new perspective. Maybe it means talking to a financial advisor or someone else you trust. Avoid the mentality of those who are perpetually “breaking the sky”. Talking to someone who has your best interests at hand can help you refocus on what’s happening in the economy and why it should be important. You.

Make it your goal to invest with purpose

Goal-based planning is the foundation of Vanguard’s investment philosophy, so when you’re unsure, remember your overall game plan. What is your goal? The answer should not be anything measurable, such as “get a 10% return per year.” Of course, there may be a few years that you get it done, but there will also be years where it doesn’t happen. This kind of thinking is bound to be frustrating, and when your expectations aren’t met, it can be tempting to look for change by messing with your portfolio.

The most important way to avoid falling into this trap is to invest purposefully. Are you investing in a specific short- or long-term goal? If so, how will this portfolio help you achieve that goal? Is that enough? If so, there is no need to be overwhelmed by the rate of return at the end of each year, and no need to chase after that.

I understand, though, that diversifying your portfolio can be a difficult process. For example, there may be parts of your portfolio that may not grow in months or even at different times of the year. If your stock is growing at an 11% rate as your bond grows 3%, you may be tempted to leave the bond altogether. Resist greed. A portfolio with objectives focuses on asset allocation to provide sustainable long-term returns and minimize the impact of unforeseen instability. It also focuses on asset positioning to help reduce the tax burden and keep your returns higher. Most importantly, a portfolio with purpose has been created You And your needs.

Take it easy on yourself when damage occurs

Let’s focus on a color that people don’t like to see in their portfolio: red. Instead of charging like an angry bull when you see red in your portfolio, take a step back and breathe. Maybe you missed an investment opportunity or the value of your portfolio declined as a result of the market rush. Remember that these losses occur. Don’t be too harsh on yourself. Instead, use these moments as an opportunity to see the big picture.

For example, between 1980 and 2019, there were 8 bull markets for the stock (20% or more decline, lasting at least 2 months) and 13 corrections (at least 10% decline). * Unless you sell during a recession, you own The number of shares remains the same. And if you reinvest your fund’s income and capital gains distribution, the shares you own continue to grow over time. In the case of market recovery, having more shares can help you revive your portfolio more quickly.

It is often said that there is a fun way to repeat history. And the investment world has a long history. Financial advisors have events that we can learn from and you can learn from them too. Then you will be ready for what will happen next.

And above all.

Must stay. This is Vanguard’s biggest mantra. Three small words that you have heard from us over and over again, although it is not something you can always hear from the media. Earlier, I recommended considering the intent of the information you received. So what Vanguard Intention? Why are we insisting on staying on the course? The answer is not for our own benefit, but rather Yours.

We are human, so we are forced to focus on our goals or feel a steady stream of losses beyond our control. But if we try to control uncertainty, we can put ourselves at even greater risk. The damage is done, and the uncertainty is here to stay. But you don’t have to be ruled by it and you certainly don’t have to be afraid of it. There are no people where you can rely on, goals to solve and life lessons to remember. You have the power to focus on what’s in your control – and it’s more than you think.

* Source: Vanguard calculation, based on performance of MSCI World Index from 1 January 1980, 31 December 1987 and then MSCI AC World Index. Both indices are divided into US dollars. Our correction calculations exclude those that turned into bear markets. We calculate the corrections that occur after a bear market recovers from its hole, even if the stock price has not yet reached their previous peak.

You’ve got the power to make strong investment decisions

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