|
31 January 2023
Last year was a tough one for investors, with stocks and bonds both experiencing bear markets. Now, with markets off to a promising start in 2023, many investors are focused on figuring out which stocks could be winners, when to buy, and even whether the January rally is a head fake.
But before making investment decisions, I recommend that investors step back, take a breath, and think longer-term. First of all, the exact timing of when you get into the market is far less important than staying invested for the long term. You might have your doubts about whether the market will be higher three months from now, but you're likely a lot more confident that it will be higher in five years.
The important thing is that you have money in the market so that you benefit from long-term market appreciation. If you're sitting in cash for prolonged periods, you're a spectator, not an investor. You might be on the sidelines because you're just too nervous to get in to the market after 2022's volatility. Moving money into the market gradually helps many investors overcome this kind of paralysis: If stocks go way up in the next month, you'll have made money. If they go down, you'll have limited your losses.
Of all my clients, those that have gotten the best investment results over the years have been the most patient ones. Rather than reacting to every one of the market's short-term ups and downs, they basically trust that over time, good companies are going to grow and make money, and that they as investors will ultimately benefit.
Now for what to invest in. The first step in figuring that out is to, again, pull back. This time you need to re-identify your goals and objectives, whether that's for the next one year or the next five, 10 or 20 years. A one-year goal might be buying a house or a car; a 20-year goal might be a comfortable retirement.
Once you know your goals, an experienced investment advisor can help you develop a mix of investments that gives you the best chance to achieve them with the least amount of risk. To populate your portfolio, your advisor can then recommend specific stocks, bonds and other investments that have the most favorable prices, business outlooks and other qualities.
If you've mostly stayed in the market throughout the past year-plus or longer, this may be good time to make sure your investments still match your tolerance for risk, your goals and your time horizon. It's likely that some of these factors have changed at least somewhat since the start of the Covid era.
Finally, to ensure that you end up with the best investment portfolio, it's advisable to work with a veteran investment advisor, one who has experience navigating through prolonged bear and bull markets. Younger advisors, no matter how credentialed and intelligent, don't have the irreplaceable perspective that comes with having spent time in the trenches. If you'd like to create a customized investment portfolio, or review your current one, please don't hesitate to get in touch.