The elections are behind us and everybody’s wondering, “What’s next for markets?” The last few months of 2018 have reminded us that market volatility can be scary, yet our economy continues to remain strong. While we’ve seen some slowing, most economic indicators still signal growth and we can’t ignore that fact. My biggest concern, however, is that most Americans allow emotions to dictate their investment strategy, leading to decisions where they buy high and sell low. In fact, studies backup this phenomenon verifying that the bad decisions investors make are often driven by emotions. So how can you invest your money with confidence while leaving nervous emotions on the shelf? Here are four tips:
- Look at current market conditions. Right now, our economy seems to be stable so normal investment strategies tend to work in this environment. Consumers and businesses are confident. Job growth remains strong and is likely to stay at a healthy level. The long-term trend in markets has not been broken and other key economic indicators appear to be in healthy territory and may even be improving. These are all strong reasons to avoid abandoning your investment strategy if you’re a long-term investor.
- Consider risks in the market today. As I write this article (mid-November), companies are reasonably priced, which is encouraging. However, we need to watch consumer confidence and employment. If confidence is shaken, this could signal that a more defensive strategy might be in order. Consider this in conjunction with potential interest rate hikes, as well as our current geopolitical landscape, and use this information to choose an appropriate risk level.
- Think about overweighting sectors that are expected to do well over the next 12-36 months and underweighting areas that may underperform. When you think about all the major places you can allocate money, it’s important to diversify without diversifying to mediocrity. Consider where money is flowing and which sectors have the best prospects for growth.
- Don’t underestimate the role an investment advisor can play in keeping you on-track. Whether you are too busy to do it yourself or you just need someone to help you take a more tactical approach, a qualified advisor can help you avoid making mistakes. If all you do is open your monthly statements and look at whether the value went up or down, you probably need to pay a bit more attention. On the contrary, if your current advisor doesn’t proactively communicate with you, you may need to consider someone who will. You work hard for every penny and you need to know that someone is working hard for you.
If you are interested in talking more about an investment strategy for 2019, email me at email@example.com to request a complimentary investment and risk assessment. Or, just email me with any questions you may have – I’m always happy to help!