A Lesson Learned about Successful Investing

By David R. Damm, AIF^®

During a market crisis, many investors are quick to become fearful of the future.  The media is largely to blame as “bad news sells” and this creates panic.  Consequently, investors tend to make emotional decisions and immediately want to change their retirement plan allocations. This is a HUGE mistake.  How a person invests (i.e. how much you invest in stocks, bonds and cash) will have a big impact on how much you have in retirement savings.

One of the most important jobs as investment advisors is to make sure our clients stay committed to their asset allocation and not make emotional (i.e. greed vs fear) decisions. That is, understanding that markets go up and down in the short run but it trends up in the long run.  A chart below shows the history of stocks, bonds and cash.  I keep copies of this chart in my conference room to illustrate these trends and help clients focus on their long-term goals.

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