Los Angeles, CA (PressExposure) May 05, 2005 -- It is important for investors to know where they have been. Lessons are, of course, learned from looking back. It is even more important for investors to know, and plan for, where they are headed. However, and unfortunately, investors typically inform their current investment decisions on the news events of the past few weeks, usually to the detriment of their investments.
Although the past, taken as a whole, holds myriad lessons for us all, focusing on the recent past poses a specific problem to investors in turbulent markets. These backwards-focused investors, shaken by the recent and ongoing market conditions, who are holding large cash positions, are not poised to take advantage of the early gains in a market recovery. Based on history the markets are likely to rebound significantly in the 12 months following this recession, as they did following the âCrash of 1987â, the mounting tensions of both the Gulf War and the Iraq War, and the âAsian Financial Crisis in 1998.â Many of investors will miss out on the first 30% of gains, in a market correction, merely because these investors perceive the markets as still failing. It would be optimal for investors to be able to time the absolute bottom of the market. But, alas, no one has a crystal ball from which to divine such information.
An important strategy investors can employ is to tailor investment portfolios to their risk tolerances, time horizons, and goals. Knowledge, diversification, and frequent rebalancing, can be good hedges against down-side risk. But regardless of whom the investors are or where they are going, investors should always drive their investments forward by committing to a plan that is designed with the future in mind. Keep your eyes fixed forward.
The above article was created by the professionals at Generations Financial Services. They can be contacted at email@example.com or at 800-260-1615.
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Past Performance cannot guarantee future results. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment.
Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.