Now that the most recent Most Important FOMC Meeting ever is behind us and stocks are getting pummeled it's time to sit back and review what individual investors have learned. There will be a quiz at the end of this column.
Russel Investments' Chief Market Strategist Steve Wood says ignoring the day-to-day noise and sticking with what he calls "goal oriented investing" is critical, especially in volatile periods such as this. By goal oriented Wood means creating a portfolio designed to meet specific goals.
It seems an obvious point but it's easy to lose the thread on why we invest. No one ever made money buying and selling equities as a political statement. How you personally feel about Ben Bernanke or the Fed's strategy for tapering stimulus can be part of your investing vision but it's not a trading catalyst.
"Buy and hold is not the same as set and forget," says Wood in the attached video. There are macro factors to consider when setting and modifying your portfolio, but these aren't decisions that should be made either late at night or in the throes of an FOMC panic. "Trying to time every wiggle in the market is not doable in my opinion and I don't know that it's possible for a person to make money doing that," Wood notes.
Wood suggests professional active money managers can find better opportunities in periods of volatility. So can individuals treating their investments not as a hobby but as a lifetime obligation to themselves.
So what did we learn from the week of volatility in the markets surrounding the Fed announcement and press conference? We learned yet again that flip-flopping your nest egg based on macro economic vacillations is a sucker's game. Let the news inform your actions, not dictate them.