How to Invest Given Recent Changes

The news cycle is a whirlwind. One day, it's a surprising election result; the next, it's a fluctuating job report or a stock market rollercoaster. It's natural to feel a jolt of anxiety and wonder, "Should I be changing my investment strategy?"

The short answer, for most long-term investors, is a resounding no.

The Noise vs. the Signal

We're bombarded with information, much of which is "noise" – short-term fluctuations and opinions designed to grab attention. What we need to focus on is the "signal" – the underlying principles of sound investing.

Here's the core philosophy: your investment strategy and asset allocation should be rooted in your:

• Financial Goals: What are you saving for?

• Risk Tolerance: How comfortable are you with potential losses?

• Risk Need: How much risk do you need to take to achieve your goals?

• Time Horizon: How long do you have until you need the money?

Once you've established this foundation, built on a globally diversified portfolio of low-fee index funds, it's crucial to stick to it.

Why Reacting to the News is a Losing Game

• Predicting the Future is Impossible: No one, not even the experts, can consistently predict how political or economic events will impact the market. Trying to time the market based on these events is a recipe for disaster.

• Emotional Investing Leads to Poor Decisions: Fear and greed are powerful emotions that can cloud judgment. Reacting impulsively to market swings often results in buying high and selling low.

• Long-Term Growth Wins: Historically, the stock market has trended upward over the long term, despite short-term fluctuations. A well-diversified portfolio held for the long haul is more likely to achieve your financial goals.

• Transaction costs eat into gains: Constantly buying and selling positions will cause you to lose money to transaction costs.

Your Plan is Your Anchor

Think of your investment plan as an anchor in a stormy sea. The waves of political and economic news may toss your boat around, but your anchor keeps you grounded.

Here's what you should do instead of reacting to the news:

• Review Your Plan Regularly: Periodically review your asset allocation to ensure it still aligns with your goals and risk tolerance. But don't make changes based on short-term market movements.

• Rebalance Annually or as Needed: If your asset allocation drifts too far from your target, rebalance your portfolio. This helps you maintain your desired risk level.

• Focus on What You Can Control: You can't control the markets or the economy. But you can control your savings rate, your asset allocation, and your investment costs.

• Stay Informed, Not Intimidated: Stay informed about economic and political events, but don't let them dictate your investment decisions.
  

In Conclusion

The best way to navigate the uncertainties of the market is to have a solid plan and stick to it. Ignore the noise, focus on the signal, and trust in the power of long-term, diversified investing. Your future self will thank you.

Need some help with your plan? We are here to help! Book a meeting today or learn more at venablesfinancialsolutions.com