This post is from Michael Yoshikami, President and Chief Investment Strategist of YCMNET Advisors, a wealth management firm:
The rollercoaster ride continues. We shriek as the market pitches and heels – but the ride’s not over yet. This rollercoaster ride isn't fun anymore. While my kids might like the thrill of fear, I'm no fan of it. And I’m guessing the average investor’s not liking it either.
Well, here's a little secret that’s built investment empires through the years. Employ this piece of advice and you’ll find yourself in control rather than wandering aimlessly, listening to so-called experts telling you what to do.
YOU decide what to do.
Make investment decisions based on what's important to you. What do you believe? You decide. After all, it's only your financial future here at stake, right? And in the end, no one else will care more for your finances then YOU.
That's the secret. You decide.
Decide what’s important to you and then listen to yourself. And be skeptical. Understand that every voice you hear has a framework, which, may or may not suit your needs. Take for example, Warren Buffett.
Oh, to be Warren Buffett. He has made and lost billions. One day's market move for Berkshire Hathaway often totals in the billions of dollars. When he says to buy, do you think he is concerned about what will happen next week or next year? Nope. He's looking at fundamental value, and he can afford to take a hit for a long time frame. He can afford to wait and simply stroll down to Dairy Queen for an ice cream.
What about you? How long can you wait? Warren Buffet says to be greedy when other people panic. Well that sounds great except that he lost $10 billion last month but still has $30 billion to fall back on. So let’s get to the real question -- Do you agree with the philosophy that says you can be patient and wait for value to emerge? Are you able to have a hot fudge sundae and let it pass?
Decide and follow your best judgment. Don't avoid making decisions -- that can be a disaster. Like a deer caught frozen in the headlights of an oncoming car, investing from this perspective makes little sense and will likely get you the same result -- trust me it doesn't work out well for the deer.
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What is YOUR philosophy? It's been oftentimes said that if you don't stand for something, you will fall for anything. Psssssst ... this applies in investing as well. So pause and answer these questions:
- Is the economic world coming to an end or is this a shorter-term challenge?
- When do you need to pull out money?
- How much pain (fluctuation down) can you take before you panic?
- The last time you panicked, what did you do and how did that work for you?
Figure out what you believe, your time horizon, the direction of the economy and your willingness to endure pain/pleasure. This will unlock the key to an investment strategy that’s right for you. And really in the end, aren't you sick of listening to everyone telling you what to do especially when it changes every 15 minutes? Be free now. Read and listen with curiosity not desperation. You'll sleep a whole lot better.