Beyond the Fluctuations: The Art of Long-Term Investing

If you have worked with a financial advisor, you have more than likely been counseled to be a long-term investor in times of market volatility. What does that mean and is that good advice?

If you are a long-term investor, that means that in times of uncertainty, instead of reacting to what’s going on in the world in the short-term and making an emotional change to your investments, you understand that volatility is normal and that it levels out over the long-term. This type of discipline can be challenging in a time when conflicts escalate in various regions of the world, unprecedented interest rate increases and when an election looms. It can feel counterintuitive to sit on your hands, but in reality, if you are set up with a well-diversified portfolio that matches your risk tolerance, this is exactly what you should do.

Your risk tolerance reflects how much volatility you are willing to endure before you get to a point where you feel like you want to abandon your investment strategy. That is why selecting the right level of risk is important. Not only can it help ensure you get a good night’s sleep when the market is volatile, but also is the key to sticking with a long-term investment mindset. The goal of keeping the money invested with a long-term target in mind, is to boost returns and cut back on any unnecessary tax and costs associated with trying to time the market. Part of being a disciplined investor is understanding that market fluctuations are a normal part of investing and that it is important not to be reactive.?

At Heritage Wealth Architects, that’s why we work with you to create a custom, research-based portfolio, driven by your goals. We understand that no one is good at timing the market. Rather than putting all our eggs in one basket, we craft a well-diversified portfolio that owns a variety of asset classes so that when one asset class underperforms, we have others to smooth out the ride. As part of this approach, we work with many market analysts and tweak our client’s portfolios when appropriate. This includes periodic rebalancing to ensure that your portfolio stays within the bounds of our agreed upon long-term risk tolerance. While adjustments are often called for, the key is to stay invested in the market to set your portfolio up for success.

You might be saying, “Yeah, but if I was able to avoid a big downturn, I’d be so much better off.” That’s not necessarily true. For example, if you pull your money out of the market entirely, like some did in March of 2020 when the World Health Organization declared COVID-19 an official pandemic, you would have missed out on one of the fastest stock market rebounds in history. Missing out on just a few of the market’s best days to try avoiding some of the worst has not been a winning strategy. Not only do you miss the upswing, but when you do decide to buy back in, investments are more expensive.

As an alternative to this kind of investing, a good strategy for tuning out a noisy market is to stick to a regular investing schedule and dollar-cost average in your funds. This means that no matter where the market is on any given day, you still make your regular monthly deposit into your brokerage account. This strategy not only encourages disciplined investing but can be a great way to buy into the market at different price points rather than all at once, which adds the option for more strategic liquidation of funds in retirement.

At Heritage Wealth Architects, we are here to be your voice of reason in uncertain times and diligently work to keep up with market research to construct portfolios that help smooth out market blips along the way. We work with you to create a custom portfolio that matches your risk tolerance so that you feel confident in your financial future. Please reach out to any member of our team with any questions.

You can reach Ashley at 651.289.6448 or? [email protected]

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