Johannesburg – Creating a financially secure life can feel like a daunting task that requires the skills of expert mapmaker and a navigator. You need to figure out where you are today and where you want to be.
As if that’s not a big enough lift, you’re then in charge of finding the best route to get from here to there without veering off into costly detours.
While it may seem easy and prudent to cash out your investments in the bad economy we are in, it is advisable to make your money work for you for the long term.
Afraid of losing money, you may decide unwisely to withdraw money and reinvest it when markets recover.
Yuvern Dokie, a senior technical investment specialist at Alexander Forbes, says: “Our finances are personal and we might easily make a knee-jerk reaction if we feel like they are being threatened, which might harm us in the long term.”
“Our instinct to protect strengthens these tendencies. Making a quick decision that we feel will help protect our investments is the most natural reaction, but is it always the correct one?”
An investment journey consists of both smooth and bumpy periods. Sharp short-term rises and falls in the market last year remind us of the importance of focusing on the bigger picture instead. Dokie explains that the bigger picture is big for a reason.
“It serves to remind us how easily we can make impulsive decisions when we are under pressure. In most cases, we would have been better off not being reactive and rather considering if our decision aligns with what we aim to achieve.”
According to Dokie, 2020 has proven that all the rules of investing have not changed.
• Stay committed to long-term goals: The markets can be a scary place at times, but longterm investors shouldn’t panic.
• It is nearly impossible to time the market: Changing an investment strategy designed with the long term in mind because of short-term ups and downs often ends in missed opportunities or even losses.
• What goes down will go up: Past performance of investment returns reminds us that the gains experienced over many years outweigh the losses experienced in a few months.
• Don’t put all your eggs in one basket – spread the risk: The right mix of defensive and growth investments can help protect your money during market shocks and grow it when the market recovers.
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