Are you overwhelmed with ambivalence about where stocks are headed next? To give some perspective, the American Association of Individual Investors (AAII) said the average investor bullish sentiment has been below 39% (historical average) for 15 of last 17 weeks and the investor bearish sentiment is below 30.5% (its historical bearish average). Are you “thinking about the right action,” confused about what to do given the lack of direction?
What did you do last Thursday (7/31/14) when the market dipped 1.8%, wiping out in a single day all the 2014 gains for at least one major index, the Dow Jones Industrial Average? Did you buy in at cheaper prices or did you sell thinking a correction is in the wings? Did you take any action?
At GV, we strive to take emotion out of the picture. We take immediate action only when and where needed. Yes, hypothetically speaking, we would have bought stocks had last Thursday’s sell-off breached our proprietary rebalancing bands. Market swings give our rebalancing processes an opportunity to sell what has appreciated and buy what has gone down.
Whether in bull or bear markets, reallocating assets from better-performing asset classes to worse-performing ones can feel counterintuitive to the retail investor. Develop a disciplined process to take action so that you are not caught watching from the sidelines as the markets provide opportunities. Because investing can at times be challenging and difficult to overcome emotionally, we believe an advisor can provide you the discipline to buy low and sell high, enabling you to meet your long-term goals with lower risk.