There’s an old saying that says what goes up must come down. While that saying might have originally been applied to the laws of gravity, it’s applicable to all sorts of things in life. From baseball dynasties to global superpowers, the number one movie at the box office to the stock market, few things ever stay either dominant or dormant forever.
Of course, that same concept can be applied to the many different forces that impact your investments. Stock markets rise and stock markets fall relative to such varied dynamics as crop production, the threat of war, civil unrest, or a whole host of other factors.
In other words, learning how to invest in turbulent times or, to put it more precisely, sticking with your investments during turbulent times, can be a difficult skill to achieve but may be important in meeting your financial goals.
History Repeats Itself
As easy as it might be to think the global turbulence we see all around us is unique and somehow makes these trying times worse than others, maintaining a proper perspective on history and our place in it might provide some solace when it’s most needed.
Granted, given the intensity and frequency of the foreboding headlines splashed across newspapers, television, and the Internet these days, it can be easy to forget about the extraordinarily difficult circumstances society has withstood and rebounded from in just the last century alone.
As dark and ominous as World War I, the Great Depression, World War II, and too many other catastrophes to count seemed at the time, both humanity and the financial markets persevered. To use a more recent example, the financial crisis of 2008 was a dark time that rattled even the most resolute of investors.
However, for those that were able to stay put in the face of Too Big To Fail, countless government bailouts, and even large banks going the way of the dinosaurs, that perseverance was rewarded with what has been a record-breaking stock market just a decade later.
Understand Your Risk Tolerance
One of the greatest gifts you can give yourself is to have an accurate and thorough understanding of your innate level of risk tolerance. If you construct your portfolio with both good and bad times in mind, you’re far more likely to be able to ride out even the choppiest of investment waters.
This means when the market is skyrocketing, you don’t let the exuberance allow you to invest more aggressively than you would otherwise since, as we stated at the top, what goes up will always come down. Keep an even keel and invest faithfully to your risk tolerance and not according to that exuberance or its first cousin – fear.
This content is designed to provide general information on the subjects covered. It is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
Gary Marriage Jr. is the founder and CEO of Nature Coast Financial Advisors, which educates retirees on how to protect their assets, increase their income and reduce their taxes. Marriage is a national speaker, delivering solutions for pre-retirees, business owners and seniors on the areas affecting their retirement and estates. He is an approved member of the National Ethics Bureau, and has been featured in “America’s Top Hometown Financial Advisors 2011” and was selected to contribute to a book with Steve Forbes titled “Successonomics”
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