Beware of scary inhabitants of the investment world
In just a few days, witches, zombies and vampires will be converging on your house, asking for candy. As is the case every Halloween, you’ll likely be merely amused over the sight of these costumed characters. But in other areas of life, such as the investment world, you may need to watch out for some seemingly scary entities. Here are a few of them:
The Horrendous Headline — Big, glaring headlines rarely offer any comfort to investors. Whether it’s political squabbles at home, conflicts in the Middle East or the debt crisis in the eurozone, there’s always something happening that’s perceived as jeopardizing the stability of the financial markets. Yet these threats are often overblown, and the markets have proven quite resilient for decades. Here in the United States, the most powerful economic engine in the history of the world has offered investment opportunities as crises have come and gone.
The Terrible Tipster — He or she could be anyone – your neighbor, friend or relative. But whatever their origins, Terrible Tipsters have one thing in common: They like to tout “hot” stocks or “can’t miss” opportunities. The problem is that by the time you actually hear about a hot stock, it may already be cooling off. And the “can’t miss” opportunities often do indeed miss. Don’t waste time, effort — and money — seeking a shortcut to investment success: There isn’t one. Instead, stick with an investment strategy that’s suitable for your goals, risk tolerance and time horizon.
The Scary Statement — When the market is down, you probably dread seeing your investment statements. But don’t let a few bad months, or even a bad year, cause you to stuff your money under your mattress. The financial markets can turn around pretty quickly, and if you’re out of the market when the next rally begins, you’ll miss out on some potentially big gains. So, put those negative statements aside and look back at your investment results over a period of many years – the big picture might look a lot less frightening than you’d imagine.
The Fearsome Forecast — The performance of the financial markets is notoriously hard to predict – but that doesn’t stop a slew of fortune-tellers from trying. And the same is true of the economy as a whole – predictions abound, but many of them prove far off base. You can always adjust your portfolio, as needed, in response to changing market or economic conditions, but don’t act on these possible circumstances just because someone, somewhere, has predicted them. Instead, follow tried-and-true principles such as diversification, which can help reduce the impact of volatility on your holdings. (However, diversification can’t guarantee a profit or protect against loss.)
The ghouls and goblins you see on Halloween are unlikely to cause you nightmares. And the various phantoms of the investment world may prove just as illusory. Don’t let them scare you away from investing.
This article was written by Edward Jones for use by your local Edward Jones Financial Adviser. Douglas J. Drost CFP Financial Adviser for Edward Jones, 2262 Reno Highway.