Investing Through the Highs and Lows

By Michael J. Searcy

Are you limiting your investment success by letting emotions about market volatility control your decisions? We know that you’re more likely to find success, however you define it, if you have a plan in place. Your plan needs a defined purpose and vision, corresponding goals, and a timeline for measurement. But it’s not enough to just have a plan, you also have to trust your plan. When emotions take over, they can quickly steer you off course. That doesn’t mean prudent changes can’t or won’t be made along the way to your goal, but without discipline, you may as well throw your plan out the window or not bother making one at all.

This year has already taken us through some market ups and downs. After months of relative calm, extreme movement in the market can lead to confusion. Fluctuations can be unnerving and it’s very normal to have anxiety, especially when headlines are shouting doomsday predictions to get more attention. Understanding the potential causes of the volatility and having steps in place to get through the fluctuation can help ease your anxieties.

What’s Behind the Fluctuation?

One question I hope people ask themselves to keep perspective during market volatility is: Are companies really worth 2%, 3%, 5%, etc. less today than they were yesterday or last week? While sometimes there may be economic cause for companies to lose value, often the volatility is due to worry and speculation. When other investors exhibit emotional behavior, it can cause you to question whether you should follow that behavior. In those times, ask yourself…

Have My Goals Changed?

It’s important to keep a long-term perspective throughout your entire investment journey, not just when we experience market dips and your advisor tells you over and over to keep that long-term perspective. Why? Because in the short term, the market trades on fear, anxiety, greed and emotion. But over the long term, emotional investing levels out and economic fundamentals drive the market.

Even in the short term volatility, the chances that you’re still on track to reach your end goal are high, but staying invested with that perspective usually gives you a better opportunity to make up for any short-term losses you might endure. Having a well-structured portfolio that contains a variety of investments, pursues individual objectives, and reflects personal risk tolerance is incredibly important.

Where Are the Opportunities?

Staying on course with your plan does not eliminate the opportunity to be flexible and look for opportunities during volatility. This is an action item we manage on behalf of our clients, but DIY investors should stay mindful that opportunity can come at all times. After the August 2011 correction, the S&P 500 had gained 25% just a year later.

With the right tools and questions, you can help settle your emotions and stay on track for personal success.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on April 10, 2018 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.