Big, unexpected events commonly trigger strong emotional reactions. The wiring in our brains triggers us to quickly respond to new stimuli. The initial course of action is often the wrong one when we’re not in physical danger. This is particularly the case when it comes to managing our portfolios, which is why I’m sending this week’s commentary out a day early.
Long-term investing success comes in large part from simply sticking to a plan no matter what is going on around you. This is far easier said than done when big events occur. Our desire to do something conflicts directly with what is best for achieving our long-term financial goals.
So, I’m not going to tell you those of you feeling a strong emotional response to yesterday’s election to not do anything. Rather, I want you to act. Take a deep breath. Turn off the television and go for a walk. Read a good book that has nothing to do with investing, such as “Proof: The Science of Booze” (Houghton Mifflin Harcourt, 2014). Do something that does not involve thinking about politics or the market. After the past several months of campaigning, the break will do you some good.
Join AAII and Receive Winning Model Portfolios
Investing the “AAII Way” has always been about distilling current financial theory and academic research into knowledge that our members can act upon. As a member of AAII, you’ll receive monthly updates on the holdings, performance and investment strategies behind our real-world portfolios. New members are rushed a special guide to our model portfolios. This guide acts as an invaluable “cheat sheet” for those who want to quickly build a personal version of their own AAII stock or fund portfolio.