Are you constantly checking the value of your 401(k)? If so, stop. Always checking your 401(k) won’t improve the markets or the economy. In fact, it will probably cause you to make some bad decisions, like selling at the lows and locking in losses.
A better approach is to identify what you can control and take steps to control it. Then ignore the rest and relax.
When it comes to finance, the main thing you can control is your allocation. Get yourself balanced between stocks and bonds. And then make sure you are diversified. Once you have done that, the rest is really out of your control.
In my experience, this is where investors make their biggest mistake. They fail to build balanced and diversified portfolios. Yet, they spend lots of time worrying about when the economy will recover. So spend your time making sure you have a solid foundation for your portfolio. This will have the biggest impact on your long term success.
Once you implement a sound strategy, you have to learn to go with the flow. Accept the inherent volatility of the markets and forget about the daily movements. You are doing all you can to position yourself for long term success.
The bottom line is that we have bull and bear markets. And bull markets generally add more than the bears take away. Being balanced and diversified doesn’t require you to time anything. It just requires you to be there, which is 90 percent of the game.
Now, if you look at your 401(k) holdings and can’t tell if you are balanced and diversified, then you need to take some action. Contact your financial advisor or 401(k) representative and ask them to explain where you stand. Worrying won’t change anything. Get educated about what you own, make changes if necessary and then let the markets do their thing.
Relax image by frogarythm, CC 2.0
