Your funds: 5 questions to ask yourself before investing now | Economic news


This is the time of a market downturn when investors usually become their own worst enemy.

Beaten by a downturn they vowed to endure, they watch small rallies – some even watch portfolios again – matching their investment fortunes with their financial fates at the hands of persistent inflation and thinking the moment came to change.

They fear that the pain they feel at the gas pump and the supermarket will affect their investment portfolio and never go away.

The Wall Street Journal published a poll last week – conducted with NORC at the University of Chicago – which showed that 35% of Americans feel dissatisfied with their finances, the highest level since NORC (then known as of National Opinion Research Center) began asking that question in 1972.

Nearly 40% of respondents said their financial situation had deteriorated over the past few years. The last time more than a third of Americans said their financial situation had deteriorated was during the 2008 financial crisis/recession. And seven out of eight survey respondents described the economy as “poor.” or “not so good”.

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Under these conditions, people feel an urge to “do something”. It’s usually not a panicked cash-out or anything drastic, but a potential portfolio panacea, a tonic for frayed nerves taken with the idea that it will also have a positive impact.

It would be a dramatic exaggeration to assume that all moves made under these conditions go wrong, but even those that end well often short-circuit long-held strategies.

If you cut regular contributions to your investment or savings plans while waiting for “better terms”, for example, you are throwing the average purchase price out the window. This practice – where you buy regularly, allowing your money to go further into buying stocks when an investment is down – tends to pay off in the long run; Switching to a market-timing strategy may seem sensible, but it puts your investment process more at the mercy of emotions and hunches than regular practice.

It won’t break you or mean you can’t retire on time or comfortably, but it’s not ideal.

The problem with all of these moves is that dealing with short-term discomfort can have long-term implications.

With that in mind, anyone considering taking action right now should ask five questions that go beyond stock analysis to provide emotional investment protection.

“Is my reason for wanting to make a change real?”

Your perception is not always your reality. I’ve spoken to many people who are part of that 40% of Americans who say their finances have deteriorated over the past few years.

But push them to look at the value of their investment portfolio and their home and their job prospects now compared to three years ago and few are truly worse off now. They don’t like what they see happening around them, but their net worth in 2022 is not lower than 2019 levels.

Don’t force yourself to make changes without first asking yourself whether your gut feelings are representative of real pain or just passing gas.

“What does this move fix or improve? »

Less is usually more when it comes to modifying investment strategies. If you have a plan in place – if you have reasons for the securities you own – then any move should seek to improve the portfolio.

If you can’t find a reason why a move improves your ability to achieve your goals and stay financially, no matter what the market offers next, don’t just do something, just sit there.

“Has my investment strategy changed, or is it just my emotions?”

Most investors understand Warren Buffett’s old norm that they should be greedy – and therefore buy – when others are fearful, and worried and nervous when others are greedy.

Likewise, most consumers love a good sale.

If your time horizon is long enough, the market is currently playing into long-term plans, allowing you to accumulate more stocks for a rebound that awaits us in the years to come. Sure, following a positive trend is nicer, but if your strategy was designed to follow the ups and downs of the market, nothing we’re experiencing right now is unexpected.

“What is the long-term impact of any changes I make? How can I expect this to happen in five or 10 years?

Suppose today’s actions have consequences that go beyond the temporary mental relief of “I took matters into my own hands and made a move”, because that is usually the case.

If the market is scaring you right now and you’re making money from stocks, for example, where can you invest it with the long-term hope of keeping up with inflation, and what will you need to do? it to decide to put that money back to work. The long term doesn’t always win out in the decision-making process, but it should at least be considered before executing a new plan.

“What classic investment practice or timeless rationale applies here?” »

Rebalancing a portfolio, reaping tax losses, updating your asset allocation to reflect your age and current circumstances and more are legitimate reasons to make changes to your portfolio at any time, no matter what the market is doing. .

But make sure you actually follow the strategy. Don’t reap the tax losses created by the recent market downturn, but then leave the money behind, hampering your financial plan. Don’t rebalance by drastically altering your financial plan, rather than simply adjusting holdings to the levels you had planned.

“I’m rebalancing” sounds much better than “I’m scared,” but they mean the same thing if the moves you’re making are superficial and you’re not following the plan. If portfolio moves don’t fit your long-term strategy, don’t do them.

Chuck Jaffe is a nationally syndicated financial columnist and host of “Money Life With Chuck Jaffe.” You can reach him at [email protected] and log in at


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