As I was watching Michigan State’s incredible win over Iowa, my emotions were on a rollercoaster ride. Ultimately, the outcome was what I wanted it to be but the journey had its fair share of twists and turns and it certainly was excruciating. The only way I can describe it is to compare it to the stock market. As investors we know that the market tests our emotions and it certainly has its fair share of uncertainties; just like the Michigan State football game. However, the lesson to learn is that discipline and patience do payoff in the long run.
For those who did not watch the game, you would have seen a team that was confident, patient and with a game plan. The game plan worked in the long run despite its fair share of ups and the downs. What the Spartans did doesn’t just apply to a football game; it also applies to managing your portfolios as well. Investors who have a game plan and who have the discipline to stay with that game plan, despite ups and downs and twists and turns, tend to be those who are successful. Investors who don’t have a game plan or let their emotions sway their decisions, are generally investors who are not successful.
When Michigan State started their final drive of the football game, they had a game plan and they stuck with it. Ultimately, that game plan was successful. The bottom line when it comes to our investments, you have to make sure you have a game plan that can lead you to success. Unfortunately, too many investors do not have a game plan and thus, they are not successful. Although I do not like New Year’s resolutions because typically, all you’re doing is setting yourself up for failure, one thing you should dedicate yourself to do in the next year is to make sure you have an investing game plan in place. Buying and selling investments based upon emotions or what currently is happening in the market is too haphazard. You need a game plan that factors in market fluctuations as well as your individual needs and wants. You must have the discipline to stay the course, even during difficult times. You can’t let every hiccup or speed bump deviate you from your plan.
Of course there are times you need to change your game plan. However, you don’t change your game plan for short term comfort. Too many investors make the mistake of letting short-term comfort cause long-term pain. You primarily change your game plan when your individual situation needs a change. Remember markets are volatile and change faster than the weather in Michigan; that is why you have to be cautious about making wholesale changes just because markets move one direction or the other.
No one will say that having a game plan and following it is easy; it is not. Just like watching Michigan State’s final drive of the game was not easy to watch, the same thing applies to your investments. However, just like Michigan State who stayed focused and achieved their goal, that’s exactly what you should be doing with your portfolio.
Good luck!
Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.