BIG PICTURE INVESTING
It is a classic example of seeing the trees instead of the forest. Your goal as a retirement investor is to accumulate enough money to pay for a comfortable retirement. However, if you focus on short-term investment performance, you may lose track of the big picture. And that can work against you.
Are You a Micromanager?
Your retirement plan gives you the freedom to make your own investment decisions. In addition, because you can easily change plan investments, you may find yourself becoming a micromanager. That is an investor who changes investments frequently because of daily market movements instead of focusing on the big picture — a long-term investment strategy. But "chasing returns" by moving your money into whatever investment type or stock market sector happens to be doing well at the time rarely pays off in the long run.
The Unknowable Future
The problem with chasing returns is that it is virtually impossible to predict how long a particular investment or market sector will continue to be a top performer. Eventually, another investment or sector will probably take over the lead, and there will be little or no advance warning. That can leave you in the lurch if you changed the investment mix of your retirement plan account based strictly on recent performance.
The Solution: Keep a Long-term Perspective
You may be much better off by the time you retire if you use a big picture perspective when you invest. Concentrate on your goal, and choose an investment mix with the potential to help you reach that goal over time. Your retirement plan offers several investment options, allowing you to choose a well-diversified investment mix for your account. The idea behind big-picture investing is to choose a mix that offers you a realistic opportunity to achieve long-term gains while reducing the overall risk to a level you are comfortable with. After you have chosen your investments, you should not ignore market and economic developments. But you will generally want to stay with your plan unless you decide that changes in your personal situation or risk tolerance make an adjustment necessary. If you are a big-picture investor, you can be much less concerned with what the markets do on a day-to-day basis. You’ll be free to switch your investments, but you won’t feel compelled to make a move every time the markets zig or zag.
*Aaron Weinstock is a Registered Representative and Investment Advisory Representative of INVEST Financial Corporation, member FINRA/SIPC.** INVEST and its affiliated insurance agencies offer securities, advisory services and certain insurance products and are not affiliated with Tampa Postal Federal Credit Union of Tampa Bay Financial Advisors. Products offered are:
- Not NCUA insured
- Not Credit Union Guaranteed
- May lose value including loss of principal amount invested
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