When an investor takes a proactive approach to their investment plan in three key areas, and is committed to sticking to their plan in negative markets, their investment returns will be significantly greater over the long-term.
- Defining a clear goal is the best way to take a level-headed approach to creating a specific plan to meet your objectives and determining the best strategy to achieve them. Being realistic is essential to the process: investors need to recognize their constraints and understand the level of investment risk they are able to accept in all market conditions. Without an investment game plan, investors often build their portfolios from the bottom up, focusing on “star ratings” or last year’s “top ten list” rather than on how the portfolio as a whole is serving their objective.
- Have an objective in mind where you have established a reason and a goal for your investment strategy with an ultimate objective in mind that isn’t based on the current market direction. There will always be some type of investment risk whether it is trying to keep pace with taxes and inflation or trying to maintain an appropriate percentage of stocks when your account value drops during market declines. A goals-based investment strategy can help you avoid such behavior as it demonstrates the purpose and value of asset allocation, investment diversification, and rebalancing. When building your portfolio to meet a specific objective, it is important to select a variety of assets that offers the best chance of meeting that goal, subject to your ability to stay committed to your strategy.
- Regardless of where you are in your retirement stage your long-term focus should be at least five years. Most people entering retirement assume that they could be retired for 20 years or more. But sometimes investors lose sight of their investment goals and instead respond to the short-term markets.
Remember if you have a defined investment strategy with a long-term focus for success that you have been comfortable with in the past, then stay with it. If you feel that there may be a few gaps in your investment plan and you think that some revisions are needed, talk with a professional. If you haven’t taken the time to create your investment plan then now is the time to start. Don’t be tempted to over react.
Written by FNBT's Steve Schou
Steve joined First National Bank and Trust's Wealth Management team in 2020 as a Trust & Investments Officer, providing Sound Advice and expertise on investment strategies, retirement, and Social Security planning to FNBT clients. With over 30 years of financial experience, Steve's passion is to help guide people through the maze of long-term financial planning and investing. He believes in outside-the-box thinking using a holistic approach to retirement and estate planning. This approach addresses the emotional, psychological, and financial aspects of retirement. A Certified Financial Planner Practitioner™, CFP® since July 1994, Schou obtained the Accredited Wealth Management Advisor™, AWMA® in July 2018. During his career he’s been a partner in an independent investment firm, and has written many articles on the topics of investing, and retirement.