What We're Thinking: Decide Which to Focus On

  

Courtesy behaviorgap.com

People who pay attention to market news and frequently check their portfolios tend to focus on days. So, it’s only human to get caught up in the excitement and emotions of the moment. And there’s a lot to get snagged by: inflation, crypto-currencies, corona variants, China, cyber-crimes, Elon Musk, debt ceilings, whatever.

Successful investors shrug. They know that excitement doesn’t drive results. They think in terms of decades. They ask themselves, “What is the one thing I can do today that will help get me to where I want to be in 2030? If they’ve planned thoughtfully, there’s little, if anything, to do.

Here are four things to keep in mind:

1. Except for a personal, life-changing event, there’s a near zero chance that today’s excitement matters to your financial plan. Do you remember what was exciting 10 years ago? Of course not. And in 10 years you won’t remember today.

2. Estimate the effects of a sharp market break on your real life. If you can’t imagine that, just think back to March, 2020. At that low point, a globally diversified, balanced portfolio was still up 67% from 10 years earlier. And things got way better from there.

Even if we measured from the pre-pandemic peak and came back a year later, we’d find that same globally diversified, balanced portfolio was 14% higher. That’s about double the expected rate.

3. Keep a comfortable reserve of cash or bond investments, far away from stocks. “Comfortable” means different things to different people. And it will help avoid the discomfort of maybe needing to make an ill-timed sale.

4. Revisit your investment policy statement (IPS). Remind yourself about why it is the way it is. Chances are it’s because it supports your life goals.

None of this is super complex, rocket science-y. If you’ve got a well-reasoned plan, the hardest part will be to do nothing. That’s not as easy as it sounds. Few people have honed that skill well. The industry and excitement-driven media discourages it. After all, they make their living on people taking action.

If you have questions or would like assistance, guidance, or conflict-free encouragement, let us know. We’re sitting here, working hard to stay focused on decades.

James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315