Cents and Sensibility
Cents and Sensibility
Smooth out market bumps
As an investor, you may sometime wonder what on earth is going on in the financial world. One day, the stock market is down 200 points; the next day, it's up 300. One day, a scandal rocks a company; the next day, another firm declares a poor earnings report. Isn't there any completely smooth route for you to follow as you pursue a comfortable retirement and other key objectives?
Actually, there isn't. But you can help smooth out your journey by following a few basic "rules of the road." Here are some to consider:
>> Create a plan. Define your long-term goals and establish a strategy to achieve them, taking into account your individual tolerance for risk and your time horizon.
>> Take action. Don't wait for the "time to be right" before you invest, because you can always find excuses to delay. The best time to get started is right now.
>> Stay invested. When the market is "hot," it's easy for people to keep on investing. But it takes far more courage to continue investing during a long bear market, when so many people head to the sidelines. And yet, it's essential that you do stay invested, through good times and bad. Ultimately, the long-term performance of the investments you have chosen will have far more impact on your portfolio's success than the daily price fluctuations that are an inevitable part of investing.
>> Look for quality. Search for the stocks of those companies that have solid track records, strong management teams, competitive products and well-defined business plans. Of course, you'll experience ups and downs even in quality stocks, but if you hold them over time, you'll greatly increase your prospects for success.
>> Diversify your holdings. During any given market environment, some investments will be doing well, while others will not. You could try to pick the winners, but that's almost impossible to do with any consistency. You'll be much better off by diversifying your dollars among a wide range of high-quality stocks, bonds, mutual funds, government securities and other vehicles. By staying diversified, you'll help cushion yourself against downturns affecting just one type of investment, and you'll multiply your opportunities of benefiting from assets that are performing well.
>> Review your plan. You should review your financial plans and investment strategies at least once a year. Your life will constantly be evolving -- new job, new house, new children, etc. -- and you may need to adjust your plans to accommodate these changes.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com