“On the third day of Christmas my broker gave to me, three rollercoasters… “
“For every disciplined effort there is a multiple reward” – John Rohn, an author and motivational speaker. When I talk to investors about investing there are many emotions that are involved. When stocks are doing well I deal with euphoria and sometimes an irrational desire to put more money into the stock market than the person’s risk tolerance allows. But, then the stock market is going the opposite direction than what they expected I have to deal with regret and fear. What my job as a financial coach is to do is to take the emotions out of the equation. Discipline is the only way that I can keep people from doing the wrong thing for their portfolio and their future. Your instincts are your enemy!
How many times have you turned on the television and heard people say about the economy or the stock market, “This time is different! We have never had to deal with the problems that we have to deal with now! Head for the hills!!!” Guess what? This specific situation may be different, but the problems are not. We have had to deal with war, recession, high interest rates, low interest rates, heat, cold, greed, hunger, and a slew of other problems. The only way that we get through those times is to discipline ourselves to not panic and put all of our money to cash. We don’t go out and put all our money in technology, real estate, pharmaceutical companies, oil, gold, or any other place that is the “next best thing.”
What you need to do is have the discipline and foresight to own every single asset class that is out there and rebalance when the opportunity arises. When stocks go up, our tendency is to want to buy more stock and sell off the bonds and vice versa. The problem with that is it goes against the idea of buying low and selling high. The only way to accomplish that feat is to have a disciplined approach of rebalancing. Use the rollercoaster to your advantage. Don’t listen to someone who tells you the next best stock to buy or buggy whip to purchase. Have a level in your portfolio where if a certain asset appreciates in value to a certain point, you sell it off to get back into balance and purchase the other asset that depreciated. This is the only way to mitigate the risk in your portfolio while doing the all-important buy-low and sell-high. Don’t allow people to use the emotional rollercoasters that we all tend to be in at some time. BE DISCIPLINED; don’t work against your portfolio. Work with it!
Philip A. Guske