Investing can be stressful, but it doesn’t have to be. If
you have a portfolio that was built for you and use the
help of a financial advisor, you shouldn’t be too
worried about volatility and financial news.
Here are a few tips to help you invest wisely, and stay
sane at the same time.
1. Cut back on financial (entertainment) media.
The financial news is entertaining, but the
focus is on short-term trends and hype. Sure,
you need to keep up with general economic
and business news, but it isn’t wise to trade
on every piece of information that you come
across. Print media tends to be less
sensational than TV programs.
2. Stop checking your accounts online every
day. If you have a properly diversified
portfolio, built for you, focusing on daily
changes in your account value is likely to
tempt you to trade too much. Should you
make frequent transactions, hoping to profit
from price swings, your trading fees increase.
Avoid making emotional decisions and wait for
your monthly statement to arrive. As a
disciplined investor, you need to tolerate
volatility. This gives you more peace of mind,
3. Focus on the bottom line, not individual
investments. If one investment is doing well
and the other is doing poorly, what should you
do? The answer may surprise you. You
should probably sell some of the investment
that went up and buy more of the poor
performer. It seems counterintuitive, but this is
“buy low, sell high” in a nutshell. If you focus
on the value of your portfolio as a whole, you
won’t be tempted to make poor trading
decisions, like selling lagging stocks out of
4. Clean old junk out of your portfolio. Do you
have stocks you held for a while, just waiting
for them to return to the price you bought
them? A good way of knowing whether to hold
certain stocks is to ask yourself whether you
would buy them today as new positions.
Investors often think they need to wait until the
stock price comes back before selling. Cut
your losses and rid your portfolio of those old
underperformers. You will feel like a weight is
lifted from your shoulders, and you can use
that money on better prospects.
5. Create a plan and follow the rules. One of the
biggest mistakes that investors make is failing
to make a disciplined plan. Choose your
overall asset allocation, such as a mix of
stocks and bonds, and stick to it. Check your
portfolio every three months to see if your
account has fluctuated away from your
original plan (say, 60% stocks, 40% bonds). If
needed, make changes to bring your account
back to the proper proportion. This is called
rebalancing, a fantastic risk management tool.
6. Hire an investment advisor. Seeking the
advice of a professional doesn’t mean you are
not smart enough or capable enough to figure
it out on your own. You’re capable of mowing
the lawn, cleaning your house and doing your
taxes, too. But you don’t mind paying
someone else to do those tasks. There are
some cases where you should never do things
on your own. You don’t see people filling their
own cavities, right? A professional financial
advisor can help you devise your plan and
offer unbiased advice about your portfolio.
Who knows, you may even enjoy letting go of
Hopefully, taking a step back from your investing life
gives you greater peace of mind and lets you focus
more on other things like your career and family.
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Diversification does not ensure against loss.
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