The most important quality for an investor is temperament. The extreme volatility that continues to plague the market can challenge an investors’ conviction. Although, if you share Warren Buffet’s view to maintain a disciplined approach by knowing market fluctuations are normal and that patience is rewarded, a more disciplined reaction towards the irrationality of the market will assure greater success in your portfolio’s performance over time.
People are by nature irrational beings and are often tempted to make trades when they think the market is working against them. In contrast, it is the well-tempered investor that learns not to obsess over the markets’ day-to-day performance, but to have confidence that the fundamentals in which their portfolio is constructed is the margin of safety they need to weather the irrational market sentiment. This is the person that ends up receiving the most rewards over the long-term.
Successful portfolio management can require holding positions when one’s instinct may be to sell. Investors should not let the bears scare them from taking advantage of selloffs and making strategic and fundamental decisions. However, they also should not chase returns during a period of extreme or sudden market strengthening. Whether you are an active or passive investor paying attention to fundamentals does matter and staying true to your investor self is crucial to long-term investment success. It takes courage to maintain an investment discipline. Instead of trying to predict the market, focus on administering a disciplined approach consistent with your investment objectives, risks tolerance and time horizon.
To fight inflation, we must continue to discover ways to keep our wealth growing over time. A continual dialogue with your wealth advisor is imperative in keeping a rational perspective during an irrational market cycle. Connect with a Baker Tilly Wealth Management professional to learn more.
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