USE THIS CHART to navigate the roller coaster of investing
Buy Low, Sell high. That’s the one maxim that every investor knows, but for some reason most people ignore it. It seems that something always gets in the way: Emotions.
My most conservative clients are always eager to get more exposure to stocks when the Dow is flying high, and I got more requests to sell in January and February as the market was bottoming than anytime in my career. Why does this happen?
Logic and emotions have never been a perfect pairing. We all know it is logical to stay focused on your long term goals during periods of market volatility, but emotionally it becomes very difficult to follow this reasoning. Emotional instincts tend to contradict sound investment decisions.
If you make investment decisions based on emotion, you may regret that decision in the long run. This could be selling out your 401(k) after a 40% selloff only to sit on the sidelines watching as the market is up 30% in the next month. **these are hypothetical numbers**
Making wholesale changes to your 401k plan forces you to time the market. You need to be correct not only with selling your investments, but again when it’s time to buy back into the market. The results could be disastrous to your portfolio.
This chart is a great way to put your emotions in perspective and take a logical approach at decision making. Next time you want to make an investment decision based on emotion, look at this chart, and ask yourself: WHERE ARE WE NOW?