With the recent market downturn, I bucked the trend. Instead of selling, I bought.
Carl Richard’s napkin drawing from his book, The Behavior Gap, reminds us of our instincts – run the other way when things get bad. But with the discipline of a long-term investor, I chose to take Warren Buffett’s advice to “buy when the market’s on sale.”
John Bogle, founder of Vanguard, reminds us that “the stock market is a giant distraction to the business of investing.” What we should focus on instead is our long-term plan and the knowledge that, overtime, a balanced portfolio will reward us with positive returns.
I bought more shares in a low-cost, balanced fund with a long history. Its shares were on sale. My plan was to invest this extra cash – why not now? The fund’s growth chart, starting in 1929, looks like the road to Mt. Lemmon – all up hill – with a few dips or, shall we say, buying opportunities.
We each have our own risk tolerance and time horizon and we need to make decisions we can sleep with. We can only tolerate these swings if our investment portfolio is part of an overall strategy that we’re comfortable with.
I’ll end with one more quote, this one from Nick Murray, a respected financial advisor and author, “All financial success comes from acting on a plan. A lot of financial failure comes from reacting to the market.”
Give us a call if you need encouragement to not react…