When the Dow Jones Industrial Average climbed above 22,000 in August 2017 (an all-time high) I wrote an article titled “Managing Expectations.” In early October 2018, the Dow reached a record-breaking 26,800 points. In the four weeks that followed, it dropped by 2,000 points. By mid-November, the it was back near 26,000. As I write today, and the Dow is hovering at roughly 25,000, the new mantra is “maintaining perspective.”
After seeing these numbers, I felt compelled to share once again the points from my summer 2017 article. As we traverse the landscape of volatile financial markets – experiencing both the euphoric highs and the inevitable declines – it’s important to remember the following:
- Stay diversified; even if it doesn’t feel right, history shows this strategy works.
- Avoid jumping in and out of the market; it is virtually impossible to time market movement.
- Invest regularly, in both good times and in bad times; the potential to buy investments at discount prices can only happen if you are involved when things look the bleakest.
- Market corrections, no matter how painful, are a natural part of the economic cycle.
These long-term fundamental principles of investing will serve you well and set you up for long-term investment success. It also helps to stay in communication with your advisor as changes take place in your life or if you just want to get some perspective on market movement. An important role we play in our clients’ lives is being an “emotional surge protector” when unavoidable declines take place.