How To Stay On Course When The Path Ahead Becomes Increasingly Difficult

Devendra Sharma profile photo

Devendra Sharma

Financial Planner & Tax Advisor
Prudent Asset Management Inc.

Earlier this year, I had the incredible opportunity to climb to Mount Everest base camp. It’s no secret that climbing base camp requires considerable planning, training and conditioning. Yet, nothing can fully prepare you for this unparalleled physical, mental and emotional journey or the insights gained along the way. That was the case during one of our toughest ascents when it was all I could do to keep moving forward. While each ensuing step felt slower and harder than the last, it occurred to me that through the simple act of placing foot in front of the other and not looking up, you can make more progress than you may think.

This is true for so many things in life, especially now—when many people are facing a tough period due to soaring inflation, increased market volatility and growing economic uncertainty—all of which have caused anxiety for people around the globe. While circumstances like these test us and can make it harder to push through to the other side, it’s important to remember that you haven’t failed until you quit trying. I’m a firm believer that even when things seem most formidable, there are ways to continue moving forward. We may be slower, it may take us longer, or it may take more out of us—but as long as we’re on the right path, we can continue to move closer to our goals.

Below are four tips to help you weather any financial storms that come your way, so you can continue moving forward on your chosen path.

1. Remember that time in is more important than timing

There’s a saying about the financial markets that consistently rings true: It’s not about what happens on one of the days, it’s about what happens on all of the days. To understand what that means, we only have to look back a few years to 2020, as the global markets reeled amidst the uncertainty surrounding COVID-19. That uneasiness was reflected in the rapid 34% decline in the S&P 500 1 from its previous all-time high in late February, to a 3½ year low in late March 2020. However, by April 2020, the equity market had already begun to rebound and continued to post new record highs throughout most of 2020, despite the ensuing economic recession.

Those who remained invested during this period were more likely to be in a position to benefit as the stock market rallied. However, those who went to cash when the going got tough missed out on all or a portion of the historic stock market gains during this period. Of course, it’s important to remember that past performance is no guarantee of future results. Nonetheless, buying back into the market when it’s on an upward trajectory usually means paying more for shares as prices are rising. That defeats the one of the golden rules of investing: Buy low, sell high.

2. Commit to a plan

Historically, many of the market’s best-performing days have occurred right before or after a market correction. So missing even a few of the best days in the market can result in a significant lost opportunity when it comes to long-term returns. This underscores the importance of remaining committed to your investment plan, which can help fend off poor behaviors that could derail your goals, like chasing returns or trying to time the markets. These behaviors can result in emotionally based decisions that are counterproductive, causing you to sell at the wrong time or buy into the market when prices are rising.

A financial plan can help you resist the urge to adjust your strategy based solely on current market conditions. Because it’s aligned with your short and long-term goals, it’s designed to help you remain on track, regardless of day-to-day market activity.

3. Consider professional portfolio management

While it’s important to avoid reactionary behaviors that can lead to poor outcomes, staying the course doesn’t necessarily mean “do nothing.” There are times when you may need to make adjustments, such as rebalancing your portfolio to return to your original risk target, harvesting gains in a tax-efficient manner, or taking advantage of new opportunities as market sectors fall in or out of favor. In a professionally managed portfolio, this work is done for you on an ongoing basis.

If you’re managing your own investment portfolio, these decisions can be more difficult to make or may be overlooked altogether. For example, most individual investors don’t have access to the in-depth research and analytical tools that institutional managers are able to invest in. Professional managers also bring years of experience, with many having managed through multiple investment cycles, which include bear markets and corrections. They also have the advantage of making decisions devoid of emotional biases. That can be very hard to do when managing your own money, especially during periods of rapid change or increased uncertainty.

4. Communicate regularly with your advisor

One of the best ways to ensure you’re taking appropriate steps as you pursue your goals is to work with an independent financial advisor. Your advisor can keep you apprised of what’s taking place in the markets and how these changes may or may not impact your goals or planning. Knowing that someone is proactively monitoring your plan and investment strategy to ensure it remains aligned with the goals you have established for you and your family allows you to keep moving forward, no matter how difficult the terrain becomes.

1 The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Index is unmanaged and may not be invested into directly. Past performance does not guarantee future results.

By Ron Carson, Contributor

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This Forbes article was legally licensed through AdvisorStream.

Devendra Sharma profile photo

Devendra Sharma

Financial Planner & Tax Advisor
Prudent Asset Management Inc.