Trust Services and SIMPLIFY
Managing Investor Pitfalls
December 3, 2018
2018 has been a volatile year in the markets, which can be hard on investors. We often receive questions like, “Should I take money off the table?” or, “Why am I not getting the returns my neighbor is getting?” As we wrap up the year, we believe the following three pitfalls can result in investors falling short of their long-term financial goals. Fortunately, these pitfalls can be corrected, especially with the help of an experienced advisor.
1. Not diversifying.
Although it’s natural to wish in hindsight that we had invested more in the year’s best-performing markets or stocks, it’s impossible to predict the best investments ahead of time. Similarly, we may wonder why we own investments that have not done well. This year’s stock market provides an example. During much of the year, five companies were responsible for much of the entire market’s return. Those companies—Facebook, Amazon, Apple, Netflix, and Google parent company Alphabet—saw their stock prices soar. However, in recent weeks they have all declined about 20%, which is much further than the rest of the market. While it may seem like spreading your investments broadly lowers your upside potential, it also reduces your downside risk, which can help you preserve and build wealth over the long run.
2. Letting emotions like fear and greed drive investment decisions.
Emotions are a fact of life, but letting them drive investment decisions undermines a well-reasoned, long-term plan. When stock prices fall,
they have recently, we often feel pressured to act. However, market timing requires two correct decisions—when to sell and when to buy back. We believe investors who stay the course tend to fare better than those who let their emotions get the better of them.
3. Focusing on short-term distractions with funds invested for the long term.
The 24-hour news cycle not only means that new information is constantly available—it seems to demand a response. Of course, some events are influential long term, especially when they affect the tax code, government regulations, or foreign policy. However, we don’t believe the recent mid-term elections, for example, or their outcome fit this description, and to change our investment approach in response would not have been appropriate. While it’s certainly important to be informed, letting headlines distract from a long-term investment plan usually does more harm than good.
At Ronald Blue Trust, we believe that a goals-based financial plan and a commitment to a principled approach will increase the probabilities of meeting your future cash flow needs. If you’d like to speak to someone about your investment strategy or learn more about our investment philosophy, please contact a Ronald Blue Trust advisor by calling 800.987.2987 or emailing
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Disclaimer: Ronald Blue Trust obtains historical and other information from a wide variety of publicly available sources. The information and material provided is for informational purposes only and is intended to be educational in nature. We have taken reasonable care and precaution to ensure that the information is fair and accurate, or has been compiled from sources believed to be reliable. Nevertheless, we do not make any representations or warranty, express or implied, as to the accuracy, completeness, or fitness for any purpose or use of the information. The information may not in all cases be current and it is subject to continuous
change. Accordingly, you should not rely on any of the information as authoritative or a substitute for the exercise of your own skill and judgment in making any investment or other decision. We recommend that individuals consult with a professional advisor familiar with their particular situation for advice concerning specific investments, accounting, tax, and legal matters or other matters before taking any action. We shall not be liable for any direct, indirect, or consequential loss arising from any use of or reliance on the information contained here. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Investing involves risk and the value of your investment will fluctuate over time and you may gain or lose money. Past performance of any security, sector or investment style is not necessarily indicative of future results.