There are few things worse than having the market go against you. As a Wall Street trader for many years, I have had tens of thousands of positions go against me – not fun, but each was a lesson learned. There are so many emotions that arise when you are losing money in the market: fear, anger, shame, and sadness are a few. To make all of those bad feelings go away, all you need to do is click the “sell” button – its that easy. But is that the “right” decision?
Your retirement portfolio is your nest egg and it needs to grow over time so that you can reach your retirement goals. If you sell and the market immediately rises 5%, will you get back in? What about a 10% rise or a 20% rise? Are you selling because you personally can not afford to lose one more dollar of your retirement, or are you selling just to get rid of the fear and shame you are feeling?
Having a diversified asset allocation approach to portfolio management is one way to avoid falling victim to personal biases and “negative feelings”. Selling is easy, but you do not get rewarded without taking risk. Sticking to an asset allocation plan can sometimes be scary, but the stock market rewards those with patience. This article expands on these thoughts: