Your investments: Beginnings, endings and your portfolio

money (photo credit: REUTERS)
(photo credit: REUTERS)
Life is not so much about beginnings and endings as it is about going on and on and on. It is about muddling through the middle. – Anna Quindlen
This is the season of new beginnings and endings. Of course, we are in the middle of wedding season, which in many ways is the “biggest” beginning of our lives.
While I have not attended a wedding this week, I have been at two other lifecycle-milestones.
I write this article after returning from my nephew Yishai’s hanahat tefillin – the first time putting on tefillin(Mazel tov to the whole family!). This is certainly a beginning that is full of both excitement and apprehension – the excitement of entering “manhood” and the apprehension of all the responsibility that goes along with it. There is also the issue of the fact that this is an action that will be with him for the rest of his life. Similar to getting married, it certainly can be intimidating to think that you will be doing this for the rest of your life.
For those of you with young children, this week also marks the end of gan, which means it’s time for the mesibat siyum – end of year pageant. I have the privilege of having two this week. Anticipation is in the air as you rush out the door with your child, and then reality hits. You have a choice – either stand for two hours or try and contort your adult body into a chair meant for a 4-6 year old. Then, you watch kids that have been rehearsing the songs and dances for weeks in both gan and at home.
For the parents of kids moving up to first grade, this event is full of contradictory emotions. There is a tinge of sadness that the “baby chapter” of the child’s book is closing; everyone is getting older. On the other hand, there is happiness that, first, there will be no more mesibot siyum and sitting in the little chairs that go along with them; and, second, a new chapter in life – first grade and school. Your child is growing up.
So what does any of this have to do with your investment portfolio? The answer is quite simple. Investors need to focus on the long term.
Just like when raising kids we may be nervous in the short term, if we take a slightly longer view and realize that whether or not the child knows the dance moves at the mesibat siyum is pretty irrelevant to adulthood. Investing is similar. Don’t get caught up in short-term market movements and get scared if the market drops 4 percent. Keep in mind that markets have corrections frequently but it’s the investor who stays patient and doesn’t panic that 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 professional investors are lousy at timing the market, why would individual investors think they can do better? I get emails and calls from clients regularly who are worried about an impending market crash. My response to them is that, first, markets rarely crash and I wouldn’t be too worried about it and, second, if they are worried about it, that means they have an incorrect asset-allocation – 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 it is allocated correctly to achieve those goals.
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.
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Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill); is a licensed financial professional both in the United States and Israel; and helps people who open investment accounts in the United States.