(photo credit: INGIMAGE)
I mentioned a few weeks ago that my oldest had turned 18. Well, last week she graduated high school - though in true Israeli fashion she still had 4 matriculation exams to take! It was my first experience attending a blue and white secondary school graduation. While they did a nice job of having parents and grandparents sitting around nicely set round tables, with some drinks, cakes and nuts, I must admit that I prefer the formality of graduations abroad. Here the girls made their own caps, which was sort of sad. I like tradition. There is something more definitive, marking the end of an era, seeing the graduates marching in their caps and gowns to the tune of Sir Edward Elgar’s Pomp and Circumstance.
That being said, I have certainly had my fill of nostalgia as my Facebook feed has been full of pictures of my cousins and friends’ children’s graduations. Chalk it up to culture differences, I guess. My Sabra children keep laughing when I show them pictures of graduates wearing caps and gowns.
With one now out of high school and everyone else moving a year closer to that milestone, for me this season brings mixed emotions. On the one hand, it means all of our children are getting older and getting closer to heading out to make their own way in the world – which is exciting. On the other hand, it means that all of our children are getting older and getting closer to heading out to make their own way in the world – which is sad in some respects.
Hold the Kleenex. Don’t worry! That is about as emotional as I ever get! So what does high school graduation have to do with financial security? The answer is simple. Investors need to focus on the long-term. Just like raising kids, we may be nervous in the short-term, and not overjoyed, when a child brings home a 60 on some history test. But if we take a longer view, we realize that whether or not the child gets the 60, or knows the dance moves at the end of year dance recital, it’s irrelevant to adulthood. (My kids would flip out if they heard me say that but I am quite confident that they don’t read my column!)
Investing is similar. Don’t get caught up in short-term market movements and get scared if the market drops 10%. I may sound like a broken record but markets have corrections frequently, and it’s the investor who doesn’t get nervous and panic who makes money and builds wealth over time.
Mark Hulbert writes, “If you think you will know it when this bull market finally comes to an end, you are kidding yourself. The vast majority of professional advisers who try to get in and out of the stock market at the right time end up doing worse than those who simply buy and hold through bull and bear markets alike. Even those few who beat a buy-and-hold strategy during one period rarely beat it in the next one.”
If the pros stink at timing the market, why would individual investors think they can do better? Recently I have received calls from clients worried about a stock market crash. They keep asking about the US trade war with China, the inability to implement Brexit, and my favorite – that they heard from a friend at work that the market is going to crash – and want to know what to do with their money. My answer is: 1. Markets rarely crash and I wouldn’t be too worried about it; and 2. If they are worried about it, it means that have an incorrect asset-allocation. It means that they have too much exposure to the stock market. If you can’t afford short-term losses in your stock portfolio, you need a more conservative approach.
Speak with your financial adviser to make sure that your portfolio is in line with your short and long-term goals and needs, and make sure that it is allocated correctly to achieve those goals.
Mazel tov to all the graduates!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. Aaron Katsman is author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel. He helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call 02.624.0995, visit www.aaronkatsman.com or email email@example.com.
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