Investment Strategy Mistakes Taught by Reckless Drivers
Have you ever encountered a reckless driver in Bloomington Normal?
Picture this: just the other day, I was cruising down Fort Jesse Rd in Bloomington Normal, contentedly tuned into WCIC on the radio as I rode to work when a cacophony of thunderous bass and the growling sound of a damaged muffler abruptly invaded my peaceful drive.
A young, impatient driver quickly approached my back bumper, then made a hasty move to cut off another motorist in the left lane. He then gunned his engine, clearly trying to weave in and out of traffic and get ahead of myself and the car in front of me. However, his attempt at outsmarting the flow of traffic proved futile when he got stuck behind a car turning left. As the rest of us continued to move along steadily, the look of frustration on his face was hard to miss.
Fast-forward to the end of my day, I found myself in a Meijer checkout lane. As I stood waiting, it appeared as though my lane was dragging along at a snail's pace, while the neighboring one was operating in warp speed. Seeing the cashier there darting through transactions, I swiftly seized the opportunity and switched lanes. Much to my delight, I was second in line in no time at all. But then, fate played its card: a pricing glitch with an item stalled the process. The irony was not lost on me as I helplessly watched my former line comrades, one by one, exit the store with their shopping bags while I was still waiting.
These experiences reminded me of the similarities with people's behavior when it comes to investing. In an attempt to capitalize on the so-called ‘hot' markets or to shield themselves from potential market downturns, investors often make abrupt shifts in their long-term investment strategies. However, more often than not, these impulsive decisions lead to greater losses. Timing the market perfectly – both when to exit and when to reenter – is unfeasible, even for the most seasoned investment professionals.
We’ve predicted that we would continue to see volatility this year, and the upcoming debt ceiling deadline impasse, for instance, could trigger market volatility. Yet, I'm not advocating for a mass exodus from the market. Why, you may ask? Simply because predicting the precise impact of these events – the ‘what', ‘when', and ‘how much' – is virtually impossible. Moreover, history suggests that markets often bounce back swiftly once the issues are resolved.
The essence of a solid long-term investment strategy lies in its resilience. It is designed to withstand the short-term fluctuations of the market and is built around your financial goals, risk tolerance, and time horizon.
Instead of reacting impulsively to market trends, it is essential to stay focused on your strategy. If you've invested in a diverse portfolio that aligns with your financial objectives and risk appetite, you should be equipped to weather market downturns. Regularly reviewing and rebalancing your portfolio can ensure that it remains aligned with your long-term goals.
The key takeaway from these experiences? Patience is a virtue, especially when it comes to investing. Stick to your long-term strategy. Trying to leapfrog the market, like that impatient driver or a hasty shopper, often leaves you worse off than you would have been by simply staying the course. So, maintain your investment lane, ride out the market's ebbs and flows, and remember that the race is not always to the swift.
In the world of investing, as in life, patience can indeed be the key to success.
Krista McBeath is an Investment Advisor, Chartered Financial Consultant, a Licensed Insurance Advisor, a Fiduciary, and an experienced tax advisor who specializes in financial planning, investments, and insurance.
She utilizes advanced tools for in-depth calculations that analyze tax and retirement scenarios to help their clients avoid a future tax time-bomb. Whether this means enjoying more of your hard-earned money in retirement or passing along assets to loved ones with less tax burden, planning makes the difference.
Her new book, The Generational Wealth System outlines a holistic approach to preserving lifestyle, wealth and legacy.