Helpful Reminders from Ironwood Wealth Management During Periods of Market Volatility
Avoid Emotional Investing
Up and down market movements are a fact of life. It is critical to not allow emotions to drive investment decisions. Stay focused on your long-term investment objectives to help ensure your plan stays on track. With the guidance of your Investment Policy Statement we have invested in portfolios which are in-line with your risk tolerance, time horizon and long-term financial success.
There’s a Bull Market Somewhere
Diversified placement in stock, bond, commodity and short term cash investments can help smooth out the inherent swings in the market. At Ironwood we invest according to the Nobel Prize winning principals of Modern Portfolio theory in an effort to gain the best long-term return for your specific level of risk.
Disciplined investment strategies such as dollar-cost averaging, portfolio rebalancing and reinvestment of dividends can help even out market fluctuations. These tactics encourage a “buy low” and “sell high” approach, allowing our clients to weather a volatile market more effectively.
Avoid the Temptation of Market Timing
Making money through investments is less about market timing than time in the market. While we may suggest and perform tactical changes to allocation we will never recommend a wholesale change in portfolio structure based upon volatility. While market timing may seem attractive it requires you to make two correct decisions that are very difficult to make: exactly when to buy and exactly when to sell. This is a risky game to play. Being out of the market at the wrong time — even if it's for a short period, can significantly cost you. The substantial rebound we experienced between mid-March 2009 and the end of 2009 is a prime example of how quickly market snap-backs occur.