I completely understand that the last few months have been scary with the swift drops in the market. Clients call everyday expressing their concerns, and asking me where do I think we go next.
Look, it's completely normal to have some worry and concern over a correcting market. If you are going to be an investor, then patience will have to become your virtue.
Investor behavior somehow reasons that now stocks are a greater risk since they have corrected, and that is false. I would argue that the stock market has more risk when prices are higher.
Your behavior during these market corrections and crashes will dictate how successful you are with your portfolio and financial goals.
My favorite discussion with a client (I'm actually being a little sarcastic here), is when the client looks me straight in the eye and proclaims these prolific words:
"First, I want steady gains when the markets are correcting, at least 5-6 percent. I don't want to lose.
"And I want superior returns in up markets. I want to do better than the Dow or S&P 500."
Really? Me too.
Investors just don't understand why that is not possible. I would say it's because of a lack of patience. That lack of patience is what causes so much underperformance and disappointment. The lack of patience in waiting for the market to do it's job, often translates into investors making precarious switches to their portfolios or even firing their financial advisor prematurely.
As investors we are not patient during a correction because of fear of losing. We are also not patient in a bull market because we feel we might be missing out on potential gains elsewhere.
The Diligent Advisor Point
Have the patience to give your poor portfolio the time it needs to meet your expectations. Now that might take a few years. Not days, weeks or months. Don't go switching to the latest hot investment when you hear it on CNBC or read it in some newsletter. Believe me, you're not going to miss out on potential gains elsewhere. You're more likely to miss the gains in your own portfolio because of your lack of patience.
Now go to this link, and subscribe to The Diligent Advisor. I probably can't make you more patient, but you'll be better informed.