Negative investment stories are an easy way to scare you and affect your decisions. It is only natural to become nervous if your investments are losing value. But paying too much attention to headlines and not enough to staying the course may prove damaging to your portfolio.
How do you position yourself for monetary success in an uncertain economy? The most important action to take is to save a specific amount of money each and every month, despite the condition of the economy or stock market.
How would your investments be affected if you stop contributions? Here is an example. A 40-year-old woman invests $500 at the beginning of each month in a 401(k) account. The funds grow at an average of 6 percent a year. At the age of 60 she will accumulate $228,880.
But if she suspends her monthly contribution for five years from ages 45 through 49, the account will be worth $166,050 at age 60. That is a significant difference.
It is hard to stay the course when short-term market volatility is making you nervous. You need to remember that your investments are long-term, and reacting to market corrections can hinder your ability to reach your long-term goals.
To be successful, you must think rationally rather than emotionally before acting. Apply discipline to financial decisions. Take a sensible “allocate, diversify, rebalance” route to investing.
Don’t let your investment decisions be based on fear. Take advantage of the many economic changes that will occur during your lifetime. Stocks will give you the growth you need to keep pace with inflation and bonds will give stability in volatile times.
When stocks are declining, a short-term view of investing may lead to rash or even panicked decisions. It is important to take emotion out of your decisions and apply a disciplined, diversified investment approach for long-term success.
Spurrier is president of M Spurrier Financial Services LLC and may be reached at (585) 271-5280 begin_of_the_skype_highlighting (585) 271-5280 end_of_the_skype_highlighting. This column is