Here at Apex we like working with clients to help them achieve their goals and make better calls. A big part of that is preparing for retirement. Our clients know what kind of ‘golden years’ they want to enjoy, and they have a plan. However, when we experience market volatility, like we did in October, some clients still call us asking if they should sell. Or if our client is sitting on a sum of money which they plan on investing, they want to avoid investing just before the market crashes.
It is normal to experience anxiety when markets go through a correction, but if you are not within 5 years of retirement, you shouldn’t be concerned. When investing, you need to think long-term and stop trying to predict or time the market.
We know we’ve been experiencing a very healthy market in the past years. We also know it will not go up forever – hence, we are planning for the next big crash. This sounds reasonable, right?
The problem is that trying to time the next market correction is nothing but speculation. It could happen tomorrow, yes. It could also happen two years down the road. And the fear of something occurring next week can stop people from growing their investment for a year or two. The biggest cost here is that of the opportunity missed.
What if in fact the market crashes? If you have a plan and know that you will be staying in the market for a long period of time, you will most likely survive the crash. As investment gurus will say time and time again “it’s about time in the market – not timing the market”.
When the hard times come, just close your eyes and take a deep breath - you just need to make it through the market low without selling. Think of yourself as riding a rollercoaster, survive the big plunges and make your way up again.
Or even better, use it to your advantage: be a smart investor and buy more when prices are low to build up your portfolio. As Mr Warren Buffet himself says “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”.
To sum it up, here’s what you need to remember:
- If you are going to make investment mistakes, make sure you are biased towards optimism and not pessimism. Long-term thinking has been rewarded in the past. Mr Buffet says, “Our favourite holding period is forever”.
- Losses are part of the deal when investing. How you react to those losses is key for your investment portfolio growth
- Saving more, thinking long-term and allowing compound interest to work its magic are your biggest allies in growing your nest egg
When investing, you need to have a long-term plan to avoid knee-jerk reactions that could impact your portfolio negatively. Working with an adviser helps you discuss your goals and what’s the best way to get there. Plans will also change with time, so it’s good to have an adviser on your side to make sure you are still on track and you are not letting emotions get in the way. Contact us if you would like to get started today.