If your investments aren’t performing as you anticipated, is it because the markets aren’t doing well or because you are undermining your own progress? Many investment performance aspects go beyond your control, but there are steps you can take to avoid mistakes with your portfolio. Understanding behaviors that could adversely affect your portfolio’s returns may help you avoid them in the future.
Losing Your Focus
It’s easy to react emotionally when hearing daily news on financial market returns. But if you’re investing for the long term, focusing on short-term market ups and downs can lead you astray. The decisions you make when investing for long-term goals, such as your retirement shouldn’t be overly influenced by current events in the markets.
You can help gain perspective by comparing several years of your investment’s returns with the performance of similar investments and a benchmark index. For long-term goals, how an investment performs under a variety of market conditions is more significant than how it performs on any given day. By setting long-term investing goals, you may be able to avoid getting turned aside by daily events.
Losing Your Balance
Diversification,1 or spreading your portfolio among different investments, can help you manage risk. But it’s important to find the right balance according to your time horizon and risk tolerance. Being too conservative may prevent your investments from keeping pace with inflation. But not being diversified enough could expose your portfolio to too much risk.
Forgetting to Review
It’s important to periodically review your investment strategy with your financial professional to ensure that it still meets your needs. And don’t forget to review your plan if there are significant personal or financial changes in your life — for example, a birth or death in your family, if you’ve gotten married or divorced, or if you’ve changed jobs. These experiences may affect your goals and objectives, so be sure to evaluate your situation to determine if any investment changes may be necessary.
1Diversification does not ensure a profit or protect against loss.
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The information and general descriptions contained in this article are designed to help you understand the factors that you should generally consider when evaluating the appropriateness of any strategy or investment in your retirement plan. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; is not intended to be viewed or construed as an advice or as a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. This document was prepared for informational purposes only and should not be considered as an advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice. Should legal, accounting or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, are not deposits or obligations of, are not guaranteed by Banco Popular de Puerto Rico, or its subsidiaries or affiliates, and may lose value.