Six Pointers When the Market is Flat

The overall stock market has been all over the place in the last 30 days—up, down, and flat. This is not the first time the market has lacked clear direction, and it definitely won’t be the last. I’ve met with several investors in the past month. Their concern has been that the stock market will remain flat or negative, and they wanted to know what to do about it. Here are six pointers to consider if you’re concerned about the market direction: When your portfolio is underperforming your expectations, it is recommended that you first review your financial plan to put things in perspective. If your portfolio lags behind your financial goals, it may be some time to tweak your portfolio’s allocation. In most circumstances, a significant overhaul of your portfolio is not warranted.Identifying that your portfolio isn’t growing in the way you want doesn’t necessarily mean that you’ve allocated your portfolio poorly—sometimes there are external factors outside of your control (COVID, Ukraine-Russia conflict, etc.) that are impacting your portfolio’s performance.Sometimes it can be frustrating or concerning to see that a whole month has gone by and your portfolio isn’t really growing, or it’s growing slower than you would prefer—this is especially true after years of above-average growth. When this happens, be careful that you don’t make brash decisions that could compromise the long-term growth of your portfolio.Any time you have a concern over your investments, you should speak with your financial advisor to make sure that you put things in perspective. I have found that the greatest threat to the long-term growth of your portfolio is unchecked emotions—emotions compromise logic and returns!Comparing your performance against other people’s performance is rarely helpful—not everyone invests in the same way or has the same risk tolerance. Comparing your returns to someone else can also create a fear of missing out (FOMO), making you do things that aren’t in alignment with your financial goals.When markets lack direction and have increased volatility, many investors pay close attention to what ‘the market’ is doing and forget that movements in ‘the market’ are just the cumulative changes in the stock value of thousands of publicly traded companies. Instead of paying attention to ‘the market,’ focus on the fundamentals of the underlying companies. In my opinion, the only times you should make significant changes in your portfolio are (1) when your portfolio performance is significantly off from your financial goals, (2) when your original premises/assumptions are no longer accurate, or (3) there are substantial changes in the long-term outlook of your investments. So there you have it—six points to help you invest wisely during a market with no direction. I’ll end with one final thought. Even the best and wealthiest investors in the world cannot foresee, or plan for, every contingency. Ray Dalio, a wise investor who I respect very much, has a flagship fund that was down in a year when my average portfolio was up. Even though his portfolio was down, it doesn’t mean that he made an allocation error—it just means that the market favored my investment style and didn’t favor his at that time.