5 Rules for Long Term Investing

By Clarity Point on April 27, 2021

Just over a year ago today, financial markets plunged, and many investors were tempted to pull their money out of the market to avoid additional losses during the COVID-19 pandemic.  Those that panicked and acted on those fears missed a powerful rally that is still ongoing.   Your ability to stay calm and stick with your plan during the market’s inevitable ups and downs can have a profound impact on your investment returns over the long run. Here are five best practices for long-term investing that can help you stay the course and avoid costly mistakes as you pursue your financial goals.

Risk is an inevitable part of investing, and temporary market declines happen, even outside of a global crisis like COVID-19. Building an asset allocation that factors in your risk tolerance can make it easier to stick with your plan during more challenging market environments. In turn, you’ll be more likely to avoid emotionally driven decisions, which often hurt portfolio performance.

Once you’ve determined your risk tolerance, allocating your portfolio across multiple asset classes and diversifying globally can help reduce the chance that the performance of any particular investment will have an outsized impact on your portfolio. For example, if you hold only five stocks and one of them does poorly, your portfolio may take a big hit.  If those stocks are highly correlated or are in the same sector, a downturn in that sector can be devastating.

Market shifts can have an impact on your asset allocation. For example, your equity allocation may balloon following a stock market rally, exposing you to more risk than you’d planned or may be comfortable with.

It can be tempting to consider pulling money out of the market if you predict a market setback, but doing so can easily hurt your returns in the long run. Market downturns are notoriously hard to predict, as are market rebounds.

When you feel tempted to react to market swings, reminding yourself why you chose your investments and the role they play in helping you reach your goals can help you stay disciplined and focused.

If these best practices have you considering how your investments are being handled, give us a call. We welcome you to reach out. We’d love to get to know a little bit about you and your situation and how we may be able to help.

 

 

 

 

 

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Clarity Point Financial Partners is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities, nor should anything contained herein be construed as a recommendation or advice of any kind. Consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. No investment process is free of risk, and there is no guarantee that any investment process or investment opportunities will be profitable or suitable for all investors. Past performance is neither indicative nor a guarantee of future results. You cannot invest directly in an index.

These materials were created for informational purposes only; the opinions and positions stated are those of the author(s) and are not necessarily the official opinion or position of Hightower Advisors, LLC or its affiliates (“Hightower”). Any examples used are for illustrative purposes only and based on generic assumptions. All data or other information referenced is from sources believed to be reliable but not independently verified. Information provided is as of the date referenced and is subject to change without notice. Hightower assumes no liability for any action made or taken in reliance on or relating in any way to this information. Hightower makes no representations or warranties, express or implied, as to the accuracy or completeness of the information, for statements or errors or omissions, or results obtained from the use of this information. References to any person, organization, or the inclusion of external hyperlinks does not constitute endorsement (or guarantee of accuracy or safety) by Hightower of any such person, organization or linked website or the information, products or services contained therein.

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