What if you valued your investments like you value your home?Submitted by Castlebar Asset Management on September 22nd, 2016
Imagine if you tried to put a price tag on your house at the end of every day or even several times a day. The process would drive you crazy! Think of all of the small things that could impact the price of your house. If a neighbor forgets to bring their trash can, minus 1%. Someone paints their house a color no one likes, down 3%. Your college-aged child is home for the summer and parks his/her beat up Honda Civic in front of your house, 2% off. If you take an extra day or two to mow your lawn or wait an extra summer to restain your deck you could get dinged by the new stock market like pricing of your house.
Your house probably didn’t change in value because of the things your neighbors or you did or didn’t do on a given day. When it comes to your house, you get an appraisal from the county or city once a year and then an independent appraisal every few years if you refinance or get a HELOC. These results may be higher or lower than the actual market value. Zillow and other sites let you price your house, but you don’t change your lifestyle because a jump in your home price. Bigger factors ultimately determine the value of your home; location, schools and how the house compares to others in the neighborhood.
Now let’s flip the scenario around. What if you think about your retirement and investment accounts with the same long term price approach as your home? You would probably have a different perspective on things. Small movements in the market on a daily basis would likely not cause you any stress. You also would not be as euphoric during strong years in the market or anxious during bear markets.
Your strategy for paying your mortgage remains the same no matter what the current real estate market looks like. You either write the check or have auto pay set-up to pay the same amount each day of the month. You don’t pay less during bad real estate markets or more during good, right? Take the same approach to investing for retirement or other goals. Be consistent with your contributions and don’t change strategy just because the financial markets have an up or down direction.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your personal financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.