For almost 20 years, I’ve been on a mission to get people to make talking about money and investing an everyday discussion. It’s hard. Why? Because money triggers strong emotions. When it comes to investing, the market’s volatility, or bumpiness, adds a dynamic that sometimes leads to erratic, extreme behavior.
This New Year has certainly been enough to give any investor heartache as the global financial markets ricochet up and down. And for many people who are in a difficult relationship, the typical reaction is to break up.
But now is not the time to say goodbye to your investments. As my colleagues have explained in The List, BlackRock’s annual outlook, volatility could soar this year. And so far, that’s proven to be true. But if you pull your money out of the market, you could miss the dramatic ups along with the disappointing downs.
Just remember you’re in this for the long haul; for better or for worse. To make this financial relationship work, it’s best to have a plan for getting through the bad times.
Keep Your Heart Strong
The heart of your portfolio should be your long-term, strong and steady holdings, anchored by your life’s goals and built to withstand all kinds of storms. It’s not the stuff you move in and out of when markets get rough.
As you build the heart of your portfolio, identify your specific goal — perhaps your child’s education, a trip around the world, or that moment when work becomes optional — and the amount of time you have to get there. It’s been my observation that when people know why they are in an investment plan, they are more able to keep their eyes on the horizon rather than worry about what’s happening today. After that, determine the strategy that gets you there, be it growth, income or capital preservation.
For your investment core, diversification is key to weathering turbulence. That means having a balanced blend of asset classes, sectors and geographic regions. This helps you to capture parts of the market that may be on the upswing when others take a tumble.
Build a Solid Foundation
It is no secret I am a massive exchange traded funds (ETFs) fan. With low fees and lots of investment options, the iShares Core series can be the building blocks for the heart of your portfolio. ETFs make it easy to get broad exposures to numerous stocks or bonds or hone in on a particular area given your market convictions.
For example, you can invest in an ETF that represents the total U.S. stock market, or focus on stocks that earn dividends. You can bolster up long-term bonds, short-term bonds or lower-risk U.S. Treasuries. Or you may want broader exposure to the U.S. bond market. iShares Core funds can also help you invest internationally.
For those of you who want it built for you, consider what we call multi-asset strategies, such as the iShares Core Allocation ETFs. These all-in-one funds automatically offer a balanced mix of stocks and bonds depending on your investment objectives and desire for risk, whether it’s conservative, aggressive or in the middle. Another benefit: iShares are cost efficient.
Stay the Course
Investing is a lifelong relationship. Your financial goals will shift and change over time. There will be ups and downs. The important thing is to remember why you got into this relationship in the first place and stay the course.
Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Buying and selling shares of ETFs will result in brokerage commissions.
Diversification and asset allocation may not protect against market risk or loss of principal.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.
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