After more than four decades in the financial industry, I have found that most people really want to get into the market or out of the market at exactly the wrong times. Buying high and selling low is exactly the opposite of what we should be doing.
An astute investor is one who can recognize the trends and keep their emotions out of their investment practices (or who uses a financial planner that insulates them from the process).
When there is fear rampant in the streets and nobody is buying, it may make sense to sit on the sidelines and see how things go for a period of time. However, when things begin to make improvements and the path seems just a little clearer with some cautious optimism, it might a good entry point.
Many investors pass this point up and stay out of the market because they may have just experienced a huge amount of fear and want a significant sign of reassurance that things are back on track. By doing this, they get back into the market when prices are much higher than they’d like.
However, if it appears that all caution has been thrown to the wind by investors, you may see that as a time to batten down the hatches and take a more defensive stance. This might help you to sell during a high before corrections happen and you lose the opportunity to cash in on your good investments.
I’m not trying to encourage market timing here, because I believe that’s a fool’s game. What I am suggesting is that making subtle moves for heavier or lighter weighting (more of a tactical move) in certain holdings could make a big difference in protecting what you have accumulated.
These cycles are all a smaller part of a long-term cycle, and both investor emotions and market situations can turn on a dime. If you are prepared to ride the rollercoaster and keep your emotions in check, it should make for a smoother ride.
Michael J. Searcy, ChFC, CFP®, AIFA®, is president & CEO of Searcy Financial Services, Inc., a registered investment management and financial planning firm located in Overland Park. His team has more than 75 years of combined experience advising clients where they stand financially. For additional information, visit www.SearcyFinancial.com.
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