“Our clients come to us for advice on how to protect their future. We take that level of trust very seriously.”
- Dan Junkin

How Hard is Investing? - Third Quarter, 2009

Dan Junkin

Honestly now, successful investing is not simple - nor even natural.

The stock market most recently bottomed on March 9th of this year.  And about that time, a lot of investors were selling their stocks.  Conversely, in the first week of October, 2007 - when the market last topped out - many people were buying stocks.  That sounds like buying high and selling low.

For most of us, contrary thinking does not come easily or naturally.  We are all too easily swayed by what the crowd thinks.  The crowd thinks - when the stock market is high - that it is probably going higher.  And when it is down - it is probably going lower.  To move against that current is difficult.

That's one of the reasons investing is hard and does not come naturally.  And that is why disciplined investing is so important - and why day trading or market timing is so difficult.

At InvesTrust, we recommend that investors establish a structured approach to investing.  That begins with establishing your risk tolerance, return expectations and time horizon.  From there, the next step is formulating an asset allocation - how much is in stocks, how much in bonds, etc.  Then, once the investments are in place, we recommend re-balancing your asset components as market values change.

For example, if you start out with 60% stocks and 40% bonds - and if the stocks grow to 70% and the bonds fall to 30%, proportionately - we would say that you ought to sell down the stocks and buy some bonds.  Conversely, if the bonds grow in proportion to the stocks, we think you should sell some bonds and buy some stocks - to get back to your original structure.

That discipline is nudging you to sell high and buy low - which is something we all say we believe in - but have a hard time doing in times of stress.

Please call us at InvesTrust, if we can be of assistance in establishing and maintaining your investment discipline.

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