Long Term Investment Strategies

If you find roller coasters uncomfortable, you’ll know the feeling. As the coaster picks up speed and hurdles toward the ground, your heart rate picks up and your stomach gets tied in knots.

But right before you’re ready to tap out, the coaster picks back up – bringing you temporary relief until the next drop.

To say that the markets in 2020 have been a “roller coaster” is a bit of an understatement. While we don’t know how the rest of the year will play out, we can take a look back and see how certain behaviors may have paid off.

As mentioned in this article, “A typical portfolio of 60% stocks and 40% bonds is down less than 1% for the year to date” (the article refers to year to date as 6/30, and other variables should be considered).

The point being that while it’s human nature to want to take action in the face of discomfort, when it comes to long term investment strategies, it may not always be prudent.

We often feel the need to do “something” because “everything” is changing. Earlier this year, the pace of change was faster than ever. Bad news hit investors left and right – nearly impossible to keep up with.

However, Nobel Laureate Eugene Fama once made a great comparison about money and soap – the more you tinker with it the less you’ll have. The same can be said in terms of applying long term investment strategies.

You may feel compelled to sell out of an investment because you see its value deflating. Instinctively you want to stop the bleeding because “now is the time – it’ll only continue to sink.”

But as we can infer from this year’s rollercoaster, and several other bear markets and corrections, patience will reward you.

Follow your financial plan. Define your goals clearly, be diversified, and pivot if there is a change in your personal circumstances – not headline news.