Global equity markets were off to a rough start in 2016 with U.S., Chinese and European markets all suffering significant losses. As usual, the financial media exacerbated the downturn by using words like “panic” which may have resulted in some ordinary investors heading for the exits rather than staying the course. Similarly, ordinary investors shouldn’t react with complete euphoria if record gains were posted rather than a selloff. Either way, it’s important to avoid myopia, stay level headed and think long term. The problem is that this kind of sensible investment advice is too boring for the financial media. It’s far more exciting interviewing two market pundits with polar opposite viewpoints who love to prognosticate about market direction. Much of this advice is a waste of time, but, if followed, could be extremely detrimental to ordinary investors. Ordinary investors should spend more time getting advice on tackling real financial challenges and less time fixated on the day to day gyrations of their investment portfolios.1
2016 has arrived and with the calendar changing, it brought an unfortunate bang. Markets have seen increased volatility since the calendar year ended, with the S&P 500 Index dropping more than 7.5% in the first 10 trading days. This volatility can leave many investors worried about losing money in their 401(k)’s, especially those close to retirement, and lead others to dramatically alter their asset allocations. However, many financial advisors, us included, would argue for a different course of action. Instead of focusing on the markets and the daily gyrations, retirees need to focus on two key areas: risk tolerance and time horizon. As long as your portfolio accounts for the risk you are willing and able to tolerate and is focused on the proper investment horizon given when and how long you plan on being in retirement, weekly fluctuations in the market should no longer worry you quite as much as they once had.