Market Madness

Are the gyrations of the stock market driving you crazy? Unless you are in the stock trading business, it may wise to limit your daily intake of financial news. You might find that your mood will improve by laying off of the negativity and you may see an improvement in your financial situation as well.  

Research has shown that most professional active fund managers fail to beat the market over the long haul. Some have proven to be exceptional for brief periods of time, but their brief periods of brilliance usually end with either lackluster or poor results, giving rise to a search for the next exceptional active fund manager. If you make your investment decisions yourself and you buy and sell your assets at the wrong time, pay too much in management fees, or fail to manage your tax liabilities, your portfolio will suffer the consequences.

So, what do you do in times of market madness?

1. Review your long-term objectives and make sure that your goals haven't changed.

2. Accept the fact that volatility might make you very anxious, but it is to be expected.

3. If you are too anxious, and too worried, it may be time to reallocate your portfolio to an asset allocation that makes more sense for your situation and allows you to sleep at night.

4. Keep in mind that it is important to reduce your risk as you get older, so you avoid selling assets in a down market.

5. Invest consistently and understand that markets don't go down forever. The next bull-or bear-market is just around the corner.

6. Know yourself. If you need access to your money in five years or less, have you set aside enough funds to enable you to weather near term volatility?

7. Markets rise and markets decline. Don't let your wealth fall victim to too much trading or to the reputation of last year's best stock picker.

8. Investing in various asset classes will help you achieve your goals if you stay the course.

9. Time in the market-not timing the market-is what matters. 

10. Don't confuse entertainment with advice. The financial media is in the entertainment business and many of the messages you hear are not appropriate for your situation and will likely compromise your long-term focus.

To maintain your sanity in an age of information overload, pay attention to things that are interesting and important to you-not the wild swings of the financial markets-and get on with your life!