Plan for long-term investment success

Many of you are concerned about the marketplace today. It’s no secret what’s been going on with the stock market. It’s down about 8 percent year-to-date with the S&P 500.

So what do you need to be doing to have long-term investment success with your money? I have published a free Brogan Financial report – 7 Keys to Financial Success – to help you unlock the mystery of building long-term wealth. I will be reviewing these seven principles over the next few weeks.

Today, I want to talk about not following the herd. Don’t let emotion get in the way and follow the crowd. That’s what we typically see when we let emotion get into the equation. Emotion is one of the biggest enemies of long-term success. We know we’re supposed to buy low and sell high. But emotion tells us to do the opposite. When we see massive inflows into the capital markets, especially equities, that tells us markets are up and doing well. That’s when it’s high. When we see massive outflows, markets are down. We’re not seeing massive outflows yet, but I think we’re getting fairly close to a point where we may start seeing a lot of that. But it’s that human emotion. We tend to want to get out when things are bad. So we buy high and sell low and that’s what the crowd does. You’ve got to be careful you don’t flow with the crowd.

When we follow emotion and buy in when things are good and sell when things are bad I equate it to chasing returns. It’s kind of like driving down the interstate during rush hour traffic and you’re in the middle lane when your lane comes to a complete stop. You look over to your left and that lane is steadily moving. What do you do? I’ve got to be honest, I get over in that left lane. Don’t we all. But then what happens? We get over and the left lane grinds to a stop and the middle lane starts moving.

We try to chase what’s hot and then it bogs down and the middle lane starts moving. That’s what happens when you follow the herd, and you let emotion get in the way.

It shouldn’t surprise us when we have market corrections. We are in a market correction right now. We don’t know why and when but we know corrections and bear markets happen. Our planning should incorporate this threat of volatility and downside – in terms of how we draw income and not touching the risk assets for income, having the right risk profile and understanding the risk in our portfolio.

So don’t follow the herd. Don’t let emotion drive these decisions. We have to plan for risk before it happens not while it’s happening.

Want to learn more? Download my free Brogan Financial report – 7 Keys to Investment Success.