The Stock Market Game
There’s no question that periods of increased market volatility can be unsettling for investors. However, the decisions you make now—choosing to stay the course or move to the sidelines—can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.
That’s because it’s impossible to accurately time the financial markets. As a result, investors tend to opt out at the worst time, when markets are falling, and buy back in at higher prices when markets begin to rise. On the other hand, those who remain invested and focused on their long-term investment goals, have an opportunity to buy additional shares at lower prices when stock prices drop, which helps to generate long-term portfolio growth.
A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation:
An appropriate asset allocation, aligned with your goals, time-frame, and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations.
Helps eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.
Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification. Asset allocation does not guarantee profit or protect against loss.
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