Here are four reminders to keep you focused on the right path, even in the face of uncertainty:
1. Remember that volatility is inevitable. Successful investors recognize that even blue-chip assets are prone to modest peaks and troughs. Now is not the time to panic and sell based on raw emotion and hype—but now might be a good time to evaluate your asset allocation to ensure that your portfolio is aligned to your long-term goals and needs. Get an instant x-ray of your current portfolio here.
2. Let your true risk tolerance shine. The key organ for investing is the stomach, not the brain. Successful investors are prepared—mentally, physically, emotionally—for a roller coaster of market ups and downs. With that said: if you can’t sleep at night because you’re concerned about your investments, then you’ve taken on too much risk. Determine your investor profile and risk tolerance here.
3. Stick to your roadmap. All investors have goals—be it saving for retirement, a major purchase, tuition, or special event. Your goals will dictate your time horizon, and your time horizon will dictate your asset allocation. STICK TO IT. When times get tough, investors are tempted to deviate from the path ahead. Those who are savvy (and who have strong stomachs) don’t let the proverbial Sirens become a distraction.
4. Don’t try to time the market. One of the worst mistakes that young investors make is trying to time the market. It’s statistically impossible no matter who tells you otherwise. Even more important, as a young investor, time is the greatest that you have on your side (due to the effects of compounding). Consider dollar-cost averaging or contributing a set amount (such $100) each month in order to avoid timing the market and losing out on potential returns. Read more about why timing the market doesn't work here.