Your Own Worst Enemy

It boggles my mind why stocks are the one thing everyone wants to sell when they are down. When the real estate market is down, people sit tight and wait for the market to turn around. They know they plan on living in their house for quite some time; as long as they don’t need to sell, the cycles in the real estate market have no effect on them. However with stocks, that wisdom seems to go out the window.

As financial planning professionals, we view investments as something people need for the rest of their life. As long as they don’t need the cash today, short term market events will have no effect on the long term results.

It is painful to watch investors act on short term events, unnecessarily hurting themselves. Could you be one of them? If you exhibit any of the following behaviors you may be your own worst enemy.

1) You don’t plan. Proper retirement and investment planning will keep you focused on the right things and help you stay the course when short term events are distracting you.

2) You move all investments to cash after the market goes down. Why not go out and put that for sale sign in your front yard too? Seriously, once you have a plan, you must stick with it.

3) You stop contributions to retirement plans when the market goes down. Hello, it’s a giant sale! Don’t buy less, go out and buy more; you are getting a 10-15% discount. Now is the time to increase contributions, not decrease them.

4) You think short term. Who cares what is happening right now? Put a mental calendar year on your equity accounts. For example if you are retiring in the year 2018 and need $40,000 to spend that year, then mentally assign that portion of your account a “maturity date” of 2018.

Become your own best friend: develop a plan, stick with it, buy on sale and think long term.