The Things You Can Control

by Jeff C. Johnson

During a difficult period of time in my life, a wise counselor told me, “Jeff, there are two kinds of things in the world, those you can’t do anything about, and those that you can do something about.” Think only about the ones you can affect and you’ll save a lot of time and energy.

That’s a darn good principle for life and a great one for equity market participants!

As an investor in stock market-based holdings, can you do anything about the daily market fluctuations? Absolutely not! And the evidence is clear that making daily or frequent trading decisions rarely is successful for most investors.

Does trying a “silver-bullet” strategy of picking the hottest future stock work? Rarely, because for every big winner there are dozens of losers and so-so stocks.

The point of this post is to identify what you can control as a stock market participant:

  1. The amount of your contributions? Yep, if you invest $100 per month or $1,000 per month over the long term, which option will more likely result in the greater nest egg in retirement? Of course the amounts you invest make a difference, and you control that!
  2. The timing of investments? Yes again. Buying when things appear optimistic and selling when the news is pessimistic (and stock prices are low) is a common mistake. A better way is to stay on a regular investment schedule, sometimes called Dollar Cost Averaging. Control emotions that might lead you to buy high and sell low by opting for this strategy.
  3. The way money is invested? Of course! There’s a mountain of historical evidence that confirms that owning a slice of the broad equity market is superior to buying and selling individual stocks.

Whether you’re an experienced or newer investor, that’s it.

I’ve seen it from the front row in the investment world for decades, and there’s lots of academic research supporting these actions:

  • Pick an amount you can invest regularly and then do it. Say $100 or $200 or $500 or $10,000. The amount you can easily afford regularly is the correct amount.
  • Make the investment at set intervals, monthly or every payday or quarterly or annually (monthly seems to be the magic number for many from my perspective).
  • Invest in low-cost, broadly diversified stock mutual funds. Keep making regular investments and hold on for many years.

It’s simple but not always easy in today’s media-mania world where so-called “expert” opinions abound.

Focus on what you can control, develop a written investment plan, and stick to it, and odds are good the results will follow if you are patient.

This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. The opinions expressed are the author’s own and may not accurately reflect those of Buckingham Strategic Wealth. IRN-21-2425