The Retirement Guys: Buy low, sell whyWritten by Nolan Baker Mark Clair | | email@example.com
The stock market often evokes many emotions when one is trying to decide the right time to buy or to sell. For most investors, it seems like more of a game of luck than solid decision making. Some who have sat in cash and fixed income accounts have watched the stock market rally back for years now and want to stop missing out. Others have forgotten about the crash of 2008 and don’t see the warning signs. Then there are those investors who don’t worry too much about the day to day noise of the stock and bond market. Avoid the “swirling” feeling the stock market can bring by using the following four quick and easy steps:
Investing in stocks and bonds is a long term investment plan. It can get easy to get caught up in the daily noise. The emotions of “I want it now” can cause investors to make poor short term decisions. Think of owning stocks like being an owner of a company, which is what an investor is when they become a shareholder. The typical business owner goes into buying a business for the long term and understands there will be bumps in the road along the way. Before investments are bought or sold, consider the reason why. What is the goal and what are the alternatives to consider?
2) Use defined investment goals
Every investor has the goal of making money. We feel investors who have, and stick with, defined investment goals are the ones who have the best opportunity for success in the long run. Let me give you an example of a defined investment goal.
Investor A has $100,000 with a goal of generating $4,000 a year of income. Regardless of the daily price of the $100,000, if the income goal of $4,000 a year is being received the goal is being met.
Investor B has $100,000 and wants to pay down debt with yearly profits. Each year profits are achieved, debt is paid down. In years where it is not over the goal the investment is left alone. Take investing beyond the basics of retirement planning or investment planning and clearly define the goal.
3) Don’t dwell upon the past
Earlier I talked about investors who feel they have “missed out” on the stock and bond rally in the past few years. Remember, it is really hard to go forward if decisions are made by looking in the rearview mirror. Imagine a person driving a car this way. The same principals apply to investing. The past is history, it’s done and over. Use history to make more educated decisions about the future, but don’t make decisions based solely upon the past. Consider the path going forward from where you are today and figure out the smartest, most enjoyable, and safest way to get there.
4) Schedule regular maintenance
My car has been paid off for years. It has more than 100,000 miles and runs like a champ. The only reason it has stayed in such great shape is because I take it in for regular scheduled maintenance. Even when it is running well, I still take it in for service. At the same time, when my check engine light goes on, I get in right away to avoid a bigger problem. Investors often forget to get in for regularly scheduled maintenance when the stock market is going well. It’s like not changing your oil in your car. Other times investors ignore the early warning signs, hoping the problem will go away. Compare it to hoping your check engine light might go off if you just keep driving. We all know that the check engine light won’t go off until we get proper maintenance on the car. Most people right now feel everything is going good with their investments, but for investors who haven’t got in for a regular review in the last 6 months, now is a good time for a checkup.
Remember the basics, use defined investment goals, don’t dwell upon the past, and schedule regular maintenance. If investors follow these four steps, it should help the average investor figure out what investment moves should be made. And if you still aren’t sure about your next move, get in and see a licensed financial professional that can help educate you on the options.
For more information, tune in at 1 p.m. Saturdays on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537, (419) 842-0550.
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