Managing Your Portfolio in Difficult Markets
by Charles Rotblut, CFA
Following a turbulent year in the global financial markets, it’s tempting to make changes to your portfolio. This is particularly the case if the value of your portfolio is less now than it was 12 months ago. The best strategy, however, is to not focus on last year’s performance, but rather on your long-term strategy.
Focusing on the long term isn’t just about how you view your portfolio, but how you manage it. Here are steps you should take to keep working toward your long-term goals.
In this article
- Avoid Two Common Behavioral Errors
- Think About Your Time Horizon
- Rebalance Back to Your Allocation Targets
- Sometimes, No Change Is Best
- Other Articles in the Beginning Investor Series:
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Avoid Two Common Behavioral Errors
Investors of all levels of expertise and experience often make two behavioral errors: being overconfident in their skills and projecting that the future will be just like the present (or the very recent past).
The first error occurs when an investor believes he has special insight, or at least thinks he knows enough to ignore long-term advice. An example would be moving money out of stocks because you believe a global crash is forthcoming. Doing so assumes you have special insight into the economies, monetary policies and politics of multiple countries. It also ignores the simple fact that most forecasts are wrong.
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