by Alastair Moore
Chartered Financial Planner
Control - it’s something we all seek in every aspect of life, including within our investments. It offers us a sense of security, comfort and reassurance. However, like in life, there are things you can control when investing and there are things you can’t.
The good news is that financial markets have rewarded investors over the long term. But over the short term—as anyone who has paid attention to markets knows—markets can go down as well as up.
I have shared some observations about the investment experience and what you can do to ensure you enjoy a successful one.
Don’t focus on what you can’t control
We must continually deal with uncertainty, perhaps more so than ever throughout the last 12 months, as we adjust to the political wrangling surrounding Brexit and assess what it means for us and those close to us. Regardless of the never ending uncertainty we are faced with throughout our lives, we continue to make important, life altering, choices; without knowing the outcome. We do this by assessing all the possibilities and then deciding.
Much of the financial services industry is geared toward making people think they can eliminate uncertainty in investing. However, like in life, the future is unknown. The best approach to dealing with uncertainty is to make informed choices, in line with your needs and objectives, and be comfortable with the range of possible outcomes.
Focus on what you can control
An investment philosophy serves as a compass to guide you through turbulent times of stock market volatility. When you’ve got a compass, it doesn’t take drastic directional changes to find your way. Small adjustments are all you need to stay on course.
In 2009, the US stock market was down more than 50%. A lot of people, anxious and stressed by the uncertainty, sold their holdings at a loss. The market rebounded in the following years, just as it has done throughout history. Following last month’s election result we may experience further uncertainty and volatility in the months ahead as we move towards leaving the EU. At this time, investors should ultimately trust in their investment philosophy. This will enable them to take a long term approach to their investments and weather any storms on the horizon, rather than sell their investments if markets fall and potentially miss out on the gains when the markets inevitably recover.
Investing is a dynamic process and a lifelong journey. It involves having a philosophy you can stick with, considering the range of possibilities, and making small adjustments along the way to reflect your objectives. These are the keys to a better investment experience. Stay disciplined, control what you can control, and keep a long-term view on your destination so you can focus on what really matters; enjoying your life.