Better Investment Experience – Part Four

Avoid Market Timing & Manage Your Emotions

This is the fourth of a five-part series that will help you have a better investment experience. This isn’t a deep-dive into investing or the markets, but rather some basic concepts that investors often lose sight of.

Avoid Market Timing

Even with a globally diversified portfolio, market movements can tempt investors to switch asset classes based on predictions of future performance. You might recall our segment on trying to outguess the market, in that only 13% and 14% of mutual funds and fixed income funds, respectively, outperformed their benchmarks from 2003-2017 and it’s hard to pinpoint which ones these will be.

The image below features annual ranked performance of major asset classes in the US and international markets over the past 15 years. The asset classes are represented by corresponding market indices. The patchwork dispersion of colors shows that the relative performance of asset classes is unpredictable across periods.

Investors who follow a structured, diversified approach are well positioned to seek returns whenever and wherever they occur. Conversely, diversification also reduces the risk of being heavily invested in an underperforming asset group in any given year.

Manage Your Emotions

The 2008–09 global market downturn offers an example of how the cycle of fear and greed can drive an investor’s reactive decisions. Some investors fled the market in early 2009, just before the rebound began. They locked in their losses and then experienced the stress of watching the markets climb. Many will agree that those who withdrew would have been better off if they had stuck with it.

Staying disciplined through rising and falling markets can pose a challenge, but it is crucial for long-term success. There’s no doubt that this can be an exercise in feeling the gamut of human emotions, but over time, research has shown us that the best thing we can do for our investments in the long-term, is resist making decisions based on these swings.

---

Monson Wealth Management Flat-Fee Program

Most Registered Investment Advisors charge a percentage of assets under management, which translates into the more money you have, the more you are charged, even though the servicing time may be the same as someone who has one-quarter of what you do.

Our Flat-Fee program is designed with these clients in mind. We don’t charge you more just because you have more.

Give us a call and in 15 minutes we can assess your situation to see if this makes sense for you.

“The MWM Flat-Fee Program is designed to give clients that have over $500k invested a fair shake.”
– Eldon Monson CFP®, RICP®