The year is nearly eleven months old, have you already adjusted your "long-term" portfolios?
It's easy to fall into the trap of making changes to your investment portfolios at a rapid pace, driven by external pressures or the urge to adapt to every market hiccup. However, the question we must ask ourselves is this: Are your investment portfolios the same as what you started the year with? If not, it might be time to reconsider the virtue of patience.
Embrace the Power of Original Allocations
It is all too common for advisors to succumb to market fluctuations or client demands, causing them to deviate from their original investment allocations. These allocations were not haphazard, but were based on a strategic plan designed to withstand the rigors of a full market cycle. However, in their haste to please, advisors frequently find themselves in a never-ending cycle of changes, only to discover that the original investment allocation may have outperformed the changes they made.
This perpetual dance of tinkering and second-guessing can be counterproductive and detrimental to long-term financial success. Rather than constantly chasing the latest market trend or client sentiment, consider the wisdom of giving your original allocation the gift of time to flourish and demonstrate its full potential.
The Value of Staying the Course
If you've followed best practices in portfolio creation – diversifying across low-correlated models, avoiding sector (or super sector) overconcentration, and staying open to a wide range of investment options – your original allocation should have the potential to deliver solid performance over time. It's essential to resist the temptation to tinker with your portfolio frequently.
Trust in the soundness of your initial investment strategy. It's like planting a tree; you nurture it, but you don't uproot it every time the wind blows. You allow it to grow and adapt naturally over time, confident that, given the right conditions, it will bear fruit.
The Power of Market Cycles
Markets have their seasons, and trends ebb and flow. It's crucial to allow your portfolio allocation the time it needs to behave as it has in the past.
Don't allow short-term market swings to determine how you view the performance of your portfolio, any more than you would declare summer to last forever during a heat wave or winter to last forever after just one cold day. Achieving investment success takes years, if not decades, of work. It's critical to keep an eye on the big picture and fight the impulse to act rashly in response to transient market trends.
Instead, trust in the wisdom of your original allocation, which was designed with the understanding that markets go through cycles.
Navigating External and Internal Pressures
You face external pressures as an investment advisor from peers and clients, among other sources. Even though these pressures may be strong, it's imperative to stick to a well-considered investment strategy. Long-term investment success is largely dependent on consistency, so resist the urge to make frequent changes.
Clients entrust their financial well-being to you because they value your expertise and guidance. They seek your advice to navigate the complexities of the financial markets and achieve their long-term goals. Therefore, it's essential to maintain a disciplined and patient approach to investment management.
Conclusion
Patience is a virtue that can't be overstated. While it's essential to stay informed and adapt to changing market conditions when necessary, remember that your original portfolio allocation was designed to withstand the test of time. By allowing your investments the opportunity to perform within the framework of a full market cycle, you can increase the likelihood of success.
Therefore, consider this before you jump into making changes: Are your investment portfolios the same as they were at the beginning of the year? If they are, you may be well on your way to a successful outcome. If not, it might be necessary to exercise some patience.
Invest wisely, and invest patiently.