Let’s slow down financial decision making

Financial media would have you believe that world-shaking financial events are happening multiple times a day, and that we should all be glued to our screens lest we miss their commentary on the next Musk tweet or Bitcoin boom or bust. We are buffeted by the never ending news cycle meant to maximize ad revenues for major media companies.

While the firms that handle stock trading love this day-trading mentality, and it can feel pretty darn satisfying, let me offer an alternative. Slow down.

Be deliberate in making an investment plan. The whole world isn’t likely to change if it takes a few days or weeks to understand your risk tolerance, where your investment priorities lie, your investment horizon, and other factors.

Once you’ve made a plan that works for you stick to it, and resist making changes unless:

  1. Your investment mix becomes out of line with your plan
  2. Your life situation changes and thus your plan needs to change
  3. Global economies and markets have shifted enough that a change in strategy is warranted

Each of these three areas tend to change pretty slowly, but being aware of each is key. The trickiest item for most investors will be item three. The lions share of market moves are just noise, and deeper structural changes don’t come along too often, but when they do they necessitate changes in investment plans.

Item three is also where financial advisors can play an important role. They can serve as both an advisor on the planning side and a bulwark against overly reactive or panicked decision making. It’s hard to watch investments go down and sit idly, but having the fortitude to do so is often the optimal choice.

Nathan

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