Six months ago, I wrote this article for the Daily Herald discussing three investment edges: Having better information, better analysis, or better behavior.
In that article I make the case that your behavior is the one real edge that still exists in investing. Little did I know that just days later the stock market would fall off a cliff, resulting in the largest market decline in over ten years.
The S&P 500 declined -34% top-to-bottom. In a little over a month. *bulging eyes emoji*
During turbulent times, it's important to have an investing edge to fall back on. What we discuss constantly with our clients is their investment behavior. Things like:
- Focusing on what you can control
- Having emotional intelligence
- Being disciplined and sticking to your plan
- Focusing on the big picture
- Keeping calm during market volatility
- Sticking to your time horizon
It's one thing to preach the principles of good investment behavior. It's quite another to stay steadfast to those principles when it feels like the world is falling down. It may be difficult, but those who do are often rewarded.
Fortunately, the ensuing months saw the market climb almost all the way back to previous market levels. But only those who stayed invested through the volatility participated in the rally.
While we certainly do not believe that we're out of the woods, the past six months are a reminder of the importance of investment behavior and its effect on pursuing one's long-term financial goals.
If you have any questions about your investment approach going forward, give us a call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.