It’s early 2021, and while we still can’t predict when life will return to “normal”, we hope that a safe, effective vaccine will reach most of us this year and allow all of us to breathe a little easier. Over the last year more than ever, we have learned that uncertainty is baked into life.
What does this mean for how to invest your money for the future? Uncertainty has always been inherent in investing. For example, since 1926, the US stock market has had an average annual return of about 10%. However, only half a dozen times did a single year produce a return of close to 10%. Most years are much higher or much lower.
Don’t make these mistakes in 2021:
- Missing out on long-term investment growth by keeping the bulk of your liquid assets in cash. Since risk and return are directly correlated, most people need some risk to accomplish your long-term financial goals.
- Over-concentrate your investments in a few assets – such as high-flying stocks or even real estate. The cheapest and simplest way to take on an appropriate amount of risk is to invest in low-cost, well-diversified stock and bond funds that match your goals and risk tolerance.
- Finally, whatever you do, don’t try to time the markets. Wall Street tries that every year, and virtually every time, they are wrong.
With prudent advice, clear investment education and careful asset allocation, watching your investments should be pretty boring, even when the markets are volatile! Over a long period of time, it should be more like watching grass grow than riding a roller coaster.
As a REALTOR®, you will also want to consider the weight and potential inclusion or exclusion of real estate into your overall portfolio. For our clients, the right mix of real estate and traditional market investments is different for each family, but having a data-driven approach to choosing that mix is the first step.
If you’re ready to start thinking about investing, or if you just want to re-think your current approach, you can start by asking yourself some key questions. And if you need guidance, schedule some time to talk.