They say a picture is worth a thousand words. In this case, I’d argue that your financial future rides on appreciating the following two drawings by author and Behavior Gap founder Carl Richards. The first illustration illustrates how may investors behave in a volatile market. They bail out as stocks fall and sit on cash until they are convinced it’s safe to get back in. By that time, they are buying stocks high after selling low. And that, repeated time and time again, puts a real drain on your portfolio.
The far right of the second drawing probably illustrates how many of us felt in the immediate days post-Brexit. As we watch markets tank and portfolios lose value, we worried if we would ever again look at an upward slope lie the line on the right to illustrate our portfolio’s performance. Of course, everything depends on your time frame — 5 minutes, 5 days, 5 months, 5 years, 5 decades . . . you get the picture.
I will also note that, as of the end of the quarter, stocks have rebounded to where they were a week before the Brexit vote. Just another example of the long-term market view winning again!