January 5, 2010
The first decade of the 21st century is now behind us. To say that is was a bumpy ride would be an understatement. Overall the S&P 500 lost just less than 25% of its value over the 10 year period. Yesterday George blogged about the events that shaped the decade and as important as it is to know what happened in the markets and why it happened, I believe it is equally important to remember the strategies that worked and learn from our mistakes so we can be better prepared for the decade ahead.
1- Keep your long term goals in mind. If you're investing for a goal that is still years away, remember that the market is filled with ups and downs. We choose investments because we feel they will work for us in the long term, not on a week to week basis. If you believe in your investments then stick with them. Investors who pulled their money out in the first quarter of 2009 missed out on a huge rebound that likely would've recouped much of their 08' losses.
2- Diversify your assets. The saying 'don't put all your eggs in one basket' has been around for a long time, probably because in many cases it rings true. Keeping your assets spread over different types of investments and throughout different sectors of the market is an important part of maintaining a sturdy and balanced portfolio. Investors who had most of their assets in the technology sector in the early 2000's or the financial sector in 2008 likely suffered far worse than someone with a diversified portfolio.
3- Work with a professional. Find someone you trust to manage your savings and who you feel has a solid grasp of the current markets. There are many people out there with the latest and greatest idea to grow your money by leaps and bounds, but more often than not these ideas fizzle out and you're left searching for a sense of direction in your portfolio. By working with someone who knows you and understands your goals, you will be more likely to reach them.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).