It already feels like summer here in northern Indiana, and the weather forecasters are predicting a hotter-than-normal summer. Since these temps feel so unusual, it must be time to move to the cooler climes of Canada, ey? Of course, no rational person would go through the hassle and bother of moving, just because one summer was hotter than normal.
But do we act the same way with our investments? When the markets are down, studies show investors sell. When the markets are rising, studies show investors buy. Buying high and selling low is NOT a way to create wealth—that’s irrational. But that’s often what we do.
What we need to do is simply recognize that all investments cycle in and out of favor over time, as do the seasons in the natural world. A “bad season” is no reason to pull up stakes and move!