“Shifting Between Lanes When Investing”
The last time you went driving, and were caught in traffic on the highway, did you find yourself shifting from the right lane to the left lane when you saw that it was moving faster. Then as you settled in that lane, the right lane was moving faster than the left lane. After shifting back and forth you realized that you didn’t end up moving any farther than from where you started from. Perhaps if you stayed in one lane you may have ended up further along.
The same idea applies to investing too. Many times, we find ourselves trying to find the next best investment opportunity. We may buy an investment one day, and only a few days later decide to sell it so you may buy something else you thought would do better, only to learn that if you held onto the original investment you may have made just as much, if not more, than if you “stayed where you were”.
What Kind of Investment Should You Make?
When investing in the market, many do so with a purpose. It could be for building a nest egg, buying a house, or saving for retirement. In either scenario, it is important to create a suitable portfolio given your respective risk tolerance and time horizon. Then customize a strategic allocation with investments that meet your respective investment criteria. For example, having the appropriate mix of equity and fixed income investments such as, stocks, mutual funds, or exchange traded funds (“ETFs”), and bonds.
During the time that you are investing, and meeting with your respective advisor, it may be suitable to rebalance your account so that you stay within your allocation. As the markets may go up and down, your allocation may become askew, and need to be readjusted. This is perfectly normal with strategically planning for a future milestone. Depending on the level of risk one is willing to ascertain will depend on how wide or narrow the corridor of risk will be.
If one who might be young, and just got their first job out of college or graduate school may have a wider corridor of risk for long-term investing than one who is a few years from retirement and cannot afford a lot of market volatility.
Investing involves some level of strategy and patience, whereby being in the best allocation given your risk and objectives and understanding the markets do fluctuate. Having a mix of asset classes divided by the appropriate allotment may not justify immediate positive returns. Yet, with periodic rebalancing over a long-term period may still allow you to “stay in your lane”.*
*Asset Allocation is a method used to help manage investment risk, driven by complex, mathematical models and should not be confused with a simpler concept of diversification nor does it guarantee to protect against investment loss in declining markets.
Registered representative of and securities offered through Hornor, Townsend & Kent, Inc. (HTK), Registered Investment Advisor, member FINRA/SIPC, 600 Dresher Road, Horsham, PA 19044, (215) 957-7300. HTK does not accept time-sensitive or action-oriented messages delivered via e-mail, including authorization to “buy” or “sell” a security or instructions to conduct any other financial transaction. 2551271AL_MAY21