Now seems like a perfect time to recite the advice my dad gave me when it came to the stock market: “Buy low and sell high”. I suppose this applies to everything you consider an investment including baseball cards, art and real estate. But like most of you, currently anyway, it applies to our investments in the stock market including our IRAs, 401(k)s and 403(b)s. In a previous post I discussed the emotional reaction to owing the IRS with your tax return. I stated that if you took the emotion out of it, you’d probably favor the smallest refund possible.
The same applies to your long-term retirement investments. As we see record drops in the market, we need to be reminded to take the emotion out of it and not sell low. So how do you take the emotion out of it? A lot will depend on the stage of your career you are in. Obviously, if you were looking at retirement within the next few years then you are more emotionally invested versus a person just starting their career and contributing to retirement vehicles for the first time.
A few tips that I try to live by when it comes to my retirement investments:
- Don’t look at gains or losses over the short term. Try to look at longer term to get a better idea of the overall growth of your retirement investments. Don’t log in every day to see the drops. I didn’t log in everyday when it was on the rise so I shouldn’t do that when I know it is likely dropping.
- Make sure to review your portfolio every year or so and make changes based on the length of time until your retirement. Get expert advice if needed to determine what a good strategic mix of stocks versus bonds is for your retirement goal. Most 401(k)s and 403(b)s will have automatic age based balancing options that you can use.
- Every other week when I’m contributing to my 401(k) or IRA, I remind myself that during these down times that I’m buying more shares. So, shift from looking at dollars to shares and you take some of the raw emotion out because you are not focusing as much on the money.
- If you’ve been at it long enough, you have history to look back at and see how you came out of similar events in the past. You can find some comfort in knowing this has happened to you before and you are still better off now than you were then.
In the end you must do what you think is best for your situation. You may feel comfortable going it alone or you may want expert advice when it comes to your investments in the market. Either way, I certainly encourage everyone to buy low and sell high, no matter what you’re buying and selling.
Post author: Jamieson Mackay, CCUFC
The opinions expressed on this page are those of the credit union’s Certified Credit Union Financial Counselors, staff members and other authors and may not reflect the views of the credit union. Information is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author of each article.