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SBJ July 2015 Strategies That Contribute to Successful Investing

SALEM, OREGON                                               JULY 2015                                                   VOL. 11, NO. 7


Let’s Talk: W. Ray Sagner CFP


Strategies That Contribute to Successful Investing

In it for the long run

Investing is not a sprint, it’s a marathon. In a volatile market, investors can exhaust themselves chasing after the “latest and greatest” investment tip. But trying to take advantage of a short-term trend to support a long-term strategy is like starting a marathon at full speed. So rather than expending all of your energy right out of the gate, consider these actions to keep your portfolio in good financial health:

• Focus on yourself: You have no control over the future of the economy or the financial
markets. The only thing you can control is your commitment to a disciplined approach to

• Fuel for peak performance: Just like your body requires plenty of water and
the right food to function properly during a marathon, your portfolio should be regularly rebalanced to ensure your original asset allocation is aligned with your goals. Uncontrollable swings in the market make portfolio rebalancing more important than ever in an effort to keep moving ever closer toward your goals.

• Keep pace with change: Changes will happen in your life—whether planned or unplanned—and more likely than not, they’ll impact your investment goals. That’s why it’s important to revisit your financial goals regularly and make necessary updates to reflect those changes. While it’s easy to look backwards at historical market performance, it’s not easy to predict what will happen next, so you may find yourself selling when you should be buying, and vice versa. For example, let’s take a look at the performance of all of the funds in the Morningstar Large Cap Value category for two consecutive five-year periods—2004 through 2008 and then 2009 through 2013. Of the funds that ranked in the top 25% of the group in the first period, more than 50% dropped to the bottom—or completely out of existence. Ranking managers by their five-year returns provides little insight into future performance. And 22% of top quartile managers from 2004 to 2008 are no longer included within the Morningstar U.S. Large Blend Category. The bottom line is that when it comes to stellar past performance credited to “highly rated” funds, it’s important to remember that yesterday’s top performer may be tomorrow’s underachiever.

• All in good time: If you’re like most investors, you started your financial plan with the intent of achieving any number of goals. Some were short-term, like buying a house, while others had longer time horizons, such as enjoying a comfortable retirement, sending your kids to college, or buying a second home. Over the years, you’ve probably invested in stocks and bonds in an effort to steadily build and preserve your wealth over the decades to come. Your long-term strategy did not include trying to jump in and out of the market based on its short-term performance. Brief, explosive spurts of market volatility (both positive and negative) are the norm, but an impulsive investor who abandons the market during one or more of its sharp downturns, may miss the strong, ensuing rebounds.

Understand the risks
While many investors worry about market risk, company risk, interest rate risk, inflation risk or credit risk, what it all really boils down to is the risk of losing money. For most, losing money evokes a powerful, visceral reaction—so much so, that some investors turn to market timing or the buying and selling of a security based on future predictions or last year’s winner; however, choosing when to invest is extremely difficult, as those who are tempted to try and time the market may run the risk of missing periods of exceptional returns. While market movement is difficult to predict, there are a number of potential catalysts that could point to a more positive direction, and missing that move could be costly.

While it is reasonable to be critical of statistics over a specific time period, it can still be constructive. Using the S&P 500 as a proxy for the domestic equity market, let’s look at a 20-year investment period between 1994 through 2013. From this, we can see that:

• If an investor missed just the 10 best days, almost 40% of the gains would be lost.

• If they missed the 20 best days, about two-thirds of the gains are gone.

• Missing 40 best days resulted in a loss. If market volatility isn’t managed properly, market timing can seriously impact long-term performance. On the other hand, volatility provides investors the opportunity to buy stocks and mutual funds at attractive prices. Never underestimate the value of timing.

Nobody starts a marathon expecting it to be easy. No matter how hard you train and how many injuries you may sustain, it’s important to pick yourself up and keep going. It’s the same with investing—over long periods of time, the financial markets can be remarkably steady, but in the short run, sharp spikes in securities prices can be the norm. This volatility suggests the market can’t seem to make up its mind, which triggers a potentially difficult journey for investors. Many may be tempted to pull out and wait for the market to regain its footing, but moving assets from your current portfolio to what you think is a more stable investment may be a mistake. Amid uncertainty, keep your cool and avoid making potentially costly decisions based on a knee-jerk reaction. It’s important to remember to take a longer-term view when pursuing your financial goals.

The purpose of this article is to inform our readers about financial planning/life issues. It is not intended, nor should it be used, as a substitute for specific legal, accounting, or financial advice. As advice in these disciplines may only be given in response to inquiries regarding particular situations from a trained professional. Ray Sagner is a Certified Financial Plannerä  professional with The Legacy Group, Ltd, a fee only Registered Investment Advisory Firm, in Salem. Ray can be contacted at 503-581-6020, or by email at This email address is being protected from spambots. You need JavaScript enabled to view it. .You may view the Company’s web site at


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