“What are you investing for?”
That question has been asked countless times by Jim Meredith over the course of decades hosting Hefren-Tillotson’s radio program, Your Money and You.
Callers ask whether they should buy or sell a stock, bond, or mutual fund. But before he can give an answer, Jim wants to know: what is the purpose of the investment?
It’s a simple question, but a powerful one. It reveals the why behind the investment. Is the aim to grow capital? Preserve it? To generate income? Without knowing the goal, it’s hard to say whether an investment is a good one.
But there’s another reason to know the goal of your investments, especially in times like today. If you know why you’re invested, it is easier to stick with your portfolio when markets are down.
For instance, if your goal is to fund a retirement or a child’s education, you have a reason to stay invested. Giving up on your portfolio may mean giving up on attaining your dream.
Yet, it is surprisingly easy to lose sight of your goals when markets are down. Volatility can cause investors to focus on the here and now, and to replace their long-term goals with a short- term one: to stop the pain of a declining portfolio. Hence, the temptation arises to sell and move to cash.
Psychologist Viktor Frankl famously said that humans can bear any “how” in life if they know the “why.” He argued that people can overcome challenges if they find purpose and meaning in their experiences. This principle can help investors to persevere when markets are down. Remember why you’re invested and it becomes easier to stay the course.
In this quarter’s report, we review this year’s market decline, give suggestions on where to invest, and review timeless investment principles that can help investors during a difficult market.