From Brexit, police shootings, world bombings, mass shootings, the Fed indecision, market rally to all-time highs, and to top it off, a political discourse that is unbelievable. This has led to some extremely dramatic discussions by the left and the right.
As an investor, what are you to make of this environment and how do you invest during this kind of chaos?
Remember to stay focused on the long term. Don’t make drastic decisions based on your mood of the day. Investing with your emotions is a path to investing failure. Resist the temptation to invest when you are at emotional extremes.
First, have a written plan. How long will you invest? How much risk are you willing to take? What percentages do you want to invest in Cash, Real Estate, Stocks, and Bonds?
Second, have cash on hand, preferably 6-12 months of expenses should you get in a serious pinch. (And I’m not talking about feeding a Starbuck’s craving! :)) Car breaks down, house is damaged, or you lose your job are the emergencies this money is set aside for.
Third, don’t invest all of your money into retirement. Have a realistic plan for retirement. Decide what percentage you need to save for your retirement goal. Say 15% of your gross salary. Pay yourself first and then spend the rest. Wash.Rinse.Repeat. Every morning when you read the back of your shampoo bottle, you’ll be reminded of this plan.
Fourth, you should already have an exit strategy in writing for every investment that you own. And what do I mean by an exit strategy? Know how much of your money you’ve invested and when you invested it. Know what you paid for the investment you purchased. Decide when you would add more money to your investment. And decide when you would sell off your investment and walk away.
And as James Yorke wisely said, “The most successful people are those who are good at Plan B!” Go get to work on your plan. Build contingencies and review your plan at least annually. All The Best! Bryan