Change is a constant, and the past few months have witnessed some dramatic surprises. Despite all the shock and awe, the financial markets have found their way to new highs, and certain industry groups that had been laggards over the past few years have now emerged as leaders.
A few weeks into our new administration, it’s clear that there is a lot more change to come, and while policies have not been fully clarified, the trajectory has. For some, change is exciting and even invigorating. For others, it evokes worry, confusion and even sometimes fear.
[See: 8 Ways President Donald Trump Will Affect Wall Street.]
Here are four simple ways you can turn anxiety into constructive action with your investments.
Have or develop a plan. Don’t overreact to headlines and the daily gyrations of the stock market. Rather, chart out a thoughtful financial plan with a clearly defined destination. Knowing where you’re trying to get to is critical and will help to identify what, if any, changes or adjustments should be made at this time. Don’t make course corrections until you get your compass bearing.
Take the time to rebalance. Sector rotation and the post-election rally may be a rebalancing opportunity. The financial markets are fluid and recent moves have been dramatic in certain sectors. Review your investments and see if there are opportunities for you to make wise adjustments. Are you underweight areas that your plan should be emphasizing? Are you overweight sectors that exceeded expectations?
[See: 10 Long-Term Investing Strategies That Work.]
Use the market moves to improve your portfolio and keep you on track toward your long-term goals. Much the same way a pilot must make periodic course adjustments due to weather, traffic, winds, etc., an investment pilot should rebalance occasionally to ensure his/her portfolio isn’t veering off course.
Sometimes no action is the best action to take. Nervous energy can often lead to impulsive and frequent actions or changes, many of which don’t actually get you closer to your financial goals. If you are not careful, impulsive decisions could potentially move you further away from your goals and thus be costly.
Let your financial plan be the guide to any changes you make. Don’t be a financial “lane changer” believing that frequent adjustments will necessarily help you get to where you are going. Money can be like a bar of soap — the more you touch it, the smaller it gets.
Take five. One discipline many investors have employed successfully is the “take five” principle. Simply put, they wait at least five days before acting on an idea, thought or impulse they have. This pause often serves to reduce emotions to a more reasoned level as well as providing additional time for reflection.
[See: 13 Ways to Take the Emotions Out of Investing.]
Buying or selling an investment on the same day that a major headline breaks can often be the least opportune moment as the price moves can be extreme. The “take five” approach allows time for some of the noise to soften and price overreactions to stabilize. Most importantly, taking five gives an investor time to reflect upon his/her plan and destination, not just the bumps in the road.
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4 Ways to Turn Your Anxiety Into Action originally appeared on usnews.com
