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Are You Investing for Six Months or for 20 Years?

Seth Jentner08/24/2016

“I see the noise, and it’s ugly.”

Yes, an equity strategist said, “I see the noise and it’s ugly.” But he went on to say, “But understand the big picture: if you’re a long-term investor with the ability to look out beyond a few years, you’ll look back and say, this was a chance to pick up stocks I missed on the way up.”

I agree with his sentiments. The markets fluctuate every day. Let me ask you a very important question:  Are you investing for the next 6 to 12 months or for the next 10 to 20 years? The answer to that question determines in large part how you should invest your money.

Virtually anything can happen to the value of a stock, bond, mutual fund, or exchange traded fund on any given day. If you need this money to purchase something within the next year or so, you are speculating if you have invested the funds needed for that purchase in the market. No matter what your opinion of the stock, bond, mutual fund, or exchange traded fund may be, the market does not care, no matter how much research you may have done, no matter how confident you may be.

On the other hand, the long-term returns of stocks, bonds, and cash over decades and decades have demonstrated a historical trend: A diversified group of stocks tends to provide a higher total return than a diversified group of bonds. A diversified group of bonds tends to provide a higher total return than cash. This long-term trend has continued, and most economists believe it will likely continue, no matter how people respond to daily market news.

If your time frame is relatively short term, avoid speculating in the markets. On the other hand, if your investment time frame is relatively long term, ignore the short-term daily noise and work with a qualified professional to develop a diversified, low-cost, transparent investment portfolio.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.