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Rule #9: Focus on What You Can Control

Driver in car

Rules don’t have to be hard to follow. At Edward Jones, our “Rules of the Road” are meant to help you get to where you want to be when it comes to your financial goals. Our Rule No. 9 may seem obvious, but it’s a good reminder no matter how experienced of an investor you may be.

When investing, there are some things you can’t control – the day-to-day fluctuations of the market, the economy, the political environment. The good news is you don’t have to.

Too often, investors can become distracted by the latest headline or “expert” prediction. We believe one of the keys to success is to ignore these predictions and instead base your decisions on time-tested investment principles, which include:

  • Diversifying your portfolio
  • Owning quality investments
  • Maintaining a long-term perspective

Your emotions and your success

Investors’ reactions to market fluctuations – rather than the fluctuations themselves – often prevent them from reaching their goals. They tend to buy when the markets are up and they feel good, and to sell during declines – essentially buying high and selling low. Not surprisingly, this is not a successful long-term strategy. The key is to not let your emotions control your investment decisions.

Focus on your strategy

When the markets are up, it’s important to ask, “Am I now overweight in stocks and taking more risk than I need to, based on my long-term goals, and should I be rebalancing?” On the other hand, when an inevitable shock (whether economic, political or market-related) occurs, ask yourself, “How does this affect my long-term goals?”

If your goals haven’t changed, and the events don’t change your long-term outlook, there probably isn’t a reason to make changes to your strategy. In fact, these declines can present good opportunities for long-term investors. So talk to your financial advisor about ways you might use the normal fluctuations in the markets to your advantage.

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