BY COREY SYLVESTER
Cicero Edward Jones
As an investor, it’s easy to get frustrated when you see short-term dips in your investment statements. But while you cannot control the market, you may find it helpful to review the factors that you can control.
Many forces affect financial markets, including geopolitical events, corporate earnings and interest rate movements – forces beyond the control of most individual investors.
Either way, it’s important to focus on the things you can control, such as these:
Your ability to define your goals
One area where you have total control is your ability to define your goals. Like most people, you probably have short-term goals—like saving up for a new car or a dream vacation—and long-term goals, like a comfortable retirement.
Once you have identified your goals and estimated how much they will cost, you can develop an investment strategy to achieve them. Over time, some of your personal circumstances are likely to change, so you should regularly review your time horizon and risk tolerance and adjust your strategy as necessary. The same goes for your goals – they may evolve over time and require new responses from you in relation to your investment.
Your answer to market slumps
When the market falls and the value of your investments falls, you may be tempted to take immediate action to stop the losses. That’s understandable – after all, your investment results can have a big impact on your future.
However, hasty action could work against you – for example, you could sell investments that still have solid fundamentals and still meet your needs. If you can avoid making decisions based on short-term events, you can help yourself in the long-term.
Your Commitment to Invest
The financial markets are almost always in motion and their movements are difficult to predict. If you can continue to invest in all markets — good, bad, or flat — you’ll likely make much better progress towards your goals than if you took regular “time off.”
Many people jump to the sidelines of investing when the market falls just to miss the beginnings of the next rally. And by investing consistently, you increase the number of shares you own in your investments – and the larger your share, the greater your opportunity to build wealth.
The degree of diversification of your portfolio
While diversification itself cannot guarantee profits or protect against all losses, it can help significantly reduce the impact of market volatility on your portfolio. How you diversify your investments depends on several factors, but the general principle of maintaining a diversified portfolio should guide your investment approach.
It’s a good idea to review your portfolio regularly to make sure it’s still appropriately diversified.
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The world will always be full of unpredictable, uncontrollable events, and many of them will affect the financial markets to a greater or lesser extent. But within your own investment world, you always have a high degree of control – and with it the power to move towards all your important financial goals.
This article was written by Edward Jones for use by your local Edward Jones financial advisor. Edward Jones, Member SIPC.
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