Four Big Truths that Can Bring Clarity to Your Investing

Investing can be overwhelming, confusing, exhilarating, and daunting all at the same time. It takes effort, discipline, and even sacrifice to save a significant portion of your income for retirement. And sometimes, especially in the short-term.

About a year ago, when the market was leaving even long-term investors with a lot of uncertainty, Vanguard published an article about the four principles to remember when things aren't going the way you expected—specifically about the value of diversification.

Here they are, greatly summarized.¹

1. Diversification is not dead. Unless you have a crystal ball, owning a widely diverse portfolio continues to be the most prudent way to reach your goal over the long term. Also, diversification won't look the same for any two investors. How you diversify depends on your unique risk tolerance, timeline, and specific goals.

2. Diversification is not a set it and forget it process. It requires rebalancing, reassessing, and continued discipline.

3. Expect the unexpected. Because future conditions could be better or worse than the past, even a cycle that seems to be repeating will be full of surprises.

4. While returns are important, goals matter most. You can't control market returns. But you can control what you want your goals to be and how you will behave to achieve them.

Whether it's a raging bull market or a nerve-wracking correction, it's important to focus on the "why" that guides all of your investing actions.

On any given day, the market might be moving along like a lazy river or thrashing violently over boulders like white water rapids. Regardless, remember that in order to participate in the potential rewards of the market, you will have to accept downtimes as well. They are both to be expected as part of a long-term journey.


1. http://go.pardot.com/e/91522/ing-diversification-principles/94xrvz/2275364114/h/034h_nWTQTFb0ja_tkJtmBqNbOrBSfvkkLRrwGzR7_U