Monday, February 01, 2016

Jim Parker's Coffee Break: Sticking to the Plan

It’s been a volatile start to 2016 in financial markets. Worries over China, US interest rates and falling commodity prices have unnerved many investors.

How should you respond to all those scary headlines? This week’s Coffee Break highlights the importance of having a financial plan…and sticking to it.

Listen to Your Plan

One large investment bank says “sell everything”. Another says “this is a buying opportunity”. Who should you listen to at a time like this? In his latest New York Times column, Carl Richards suggests this is when having a clearly articulated financial plan pays off.
Market volatility can be hard to take. But having and sticking to a financial plan can make the ride easier. 
Responding to Volatility
It’s understandable that people feel helpless and confused during periods of extreme market volatility. But there are a few things you can do to ease your nerves, like turning off the TV, looking at your big picture and reacquainting yourself with your financial plan. Robin Powell explains.
Tough markets can trigger unwelcome emotions. Instead of acting on them, why not review your investment plan?

It's Not All in the Timing
A common temptation during down markets is to retreat to cash until the storm passes. It sounds good on paper, but people who attempt to time the market often forget they have to get two decisions right—when to get out and when to get back in again. The better decision is often to do nothing.
Thinking of timing the market to wait out the volatility? Remember, you have to get two decisions right.

Jim Parker is a VP with DFA Australia Ltd and kindly allows us to share his weekly newsletter