Uncommon Cents

I realize that people often let their emotions dictate their behavior (if not, people like me–social workers–wouldn’t have a job!). However, it’s really important to do as much as you can to plan and prepare beforehand to not let difficult times and difficult feelings affect your judgment when it comes to something like investing.

If you are investing for the long term, the most important thing to do is to have a plan. Your plan needs details, of course, but the basics are the same:

Invest regularly; take advantage of any employer matches and tax breaks offered to you; have a reasonable asset allocation; diversify; and keep costs low.

In the long term, it’s been shown over and over again that this is definitely a winner. A plan like this points out the difference between simple and easy. Coming up with this plan is simple; as we saw when we looked at, for instance, the Coffeehouse Portfolio, it’s easy to come up with a portfolio that fulfills all of those criteria. Following it, however, is not always easy when people have their emotions interfere with their behavior.

Yes, the stock market can be–and right now is–a scary place to be. But while it’s perfectly okay to be afraid, remember that it’s important to be brave. Follow your plan–you came up with it for a reason, and it was more than reasonable when you did. Stick to it; if your fundamental planning was sound, you’ll end up a winner in the long run.

Tags: Economy, Investing, Social aspects, Stocks

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