Exercise Judgment

I went to work out one morning and saw that the market was down 2%. When I came back, the market was up 2%. So, what’s the investment lesson? Don’t forget to exercise!

You want an investing plan that allows you to stay calm during mornings like that. You can’t control financial markets, but you can control how you react to them. Then you can focus on things that matter to you, like exercise for me.

The market roller coaster is one of many unknowables in our lives. Big decisions don’t line up to be solved one at a time. The challenges of work, family, health, and money all crash into each other, often at surprising times and every now and then all at once. Our brains struggle to solve an equation with so many variables.

Understanding how markets work can help with one variable in the equation. You can build a financial plan that takes into account the range of outcomes your long-term investments may produce. You’ll keep monitoring the situation, but you don’t need to keep reacting to it.

You will need to be flexible, because many kinds of uncertainty don’t guarantee one outcome. A friend of mine told me about a golf shot he hit. He called it a “son-in-law” shot. “What’s that?” I asked. “Well, it wasn’t exactly what I hoped for, but it was pretty good.” That’s retirement for a lot of people. It may not end up exactly as you imagined, but it can still be pretty good. And for some people I know whose investments outperformed their expectations, they had a better retirement than they had hoped for.

Either way, keep exercising and doing the things that really matter to you and make you feel better. The market will be there working for you when you get back.

Stay calm, stay invested, and let markets work for you.

David