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The Value of Patience in Investing

Posted by Michael Kane on Sep 23, 2016 3:53:08 PM
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value-of-patience-in-investingYou’ve undoubtedly heard the saying that “patience is a virtue,” and nowhere is that wisdom more true than in planning for retirement. However, you could easily believe otherwise if you follow the daily financial press.

Between market commentaries, breaking events, drastic stock price movements, and the latest IPO, it’s easy to get caught up in the hype of short-term gains and losses.

What many investors tend to forget is that a short-term strategy has been proven statistically inferior to a long-term, disciplined investment approach. Not only that, but rushed and impulsive decisions regarding your savings and investments often expose your portfolio to a much higher level of risk than you may intend.

The Huge Risk in “Timing the Market”

Most people know they need a long-term plan for retirement, but don’t always understand why that’s the case. Simply put, despite claims to the contrary, no one can time the market with any kind of accuracy. Financial markets are inherently unpredictable, full of variables that can quickly alter the value of your portfolio on a whim. A short-term approach is also subject to the behavior and impulses of other impatient investors, which are not always based on sound data or judgment.

Historically speaking, both the Dow Jones Industrial Average (DJIA) and Standard & Poor’s 500 (S&P 500) trend upward. However, there are numerous peaks and valleys in the 90 to 100-year history of these indices. If you made snap judgments and guessed wrong during one of these periods, you may have sold low and bought high. Obviously, that’s not a safe or profitable way to save for retirement. A recent example is the number of investors who left the market in 2008 and lost out on the gains in subsequent years.

Patience and Long-Term Strategies

Skilled advisors build diversified portfolios using well-thought-out asset allocation models. With timely rebalancing of the portfolios, they buy low and sell high. This strategy works if you are willing to invest for the long-term and allow the general positive trend of the market to work in your favor.

In order to achieve your financial goals, you must be willing to stick to your plan, avoid emotional pressure to “do something”, and wait patiently while your investments grow. If you find yourself veering off course or considering a “quick-fix” investment decision, speak to an advisor who can help you stay on track and reach your long-term goals.

If you need help staying on track with your financial plan, or are ready to begin building a plan, request a complimentary consultation with an advisor at RAA to get started.

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Disclaimer: This blog is intended for informational purposes only and should not be construed as individual investment advice. Actual recommendations are provided by Retirement Advisors of America following consultation and are custom-tailored to each investor’s unique needs and circumstances. The information contained herein is from sources believed to be accurate and reliable. However, Retirement Advisors of America accepts no legal responsibility for any errors or omissions. Investments in stocks, bonds, and mutual funds may increase or decrease in value. Past performance is no guarantee of future results. Any of the charts and graphs included in this blog are not recommendations for the purchase and sale of any security. 

Topics: Financial Planning