Investing

How to achieve investing success now and in the future 

Following the principles in real life: Easier said than done

I’m a financial advisor with Vanguard Personal Advisor Services®, but I’m also a Vanguard investor, so I experience the same market ups and downs as my clients. At times it feels like riding the extreme roller coasters I braved as a kid—jaw-dropping highs and lows with no end in sight. A wild ride indeed.

Wild market swings can test even the savviest investors, myself included. During the recent market volatility, I had to continuously remind myself of the 4 principles—the things I can control—to help keep me grounded and focused as I navigated toward my goal of buying a home.
 

Principle 1: Goals

We all have goals—some short-term, some long-term. One of my short-term goals was to buy a house, so I saved aggressively for the past few years. My longer-term goal is to achieve financial independence during retirement, which is an ongoing journey.

When market volatility hit at the end of February, I was already house-hunting. I had cash on hand that I’d saved for this goal—and didn’t want to jeopardize it—but I saw opportunities to invest some of that money for the long term while the market was down.

So I put pen to paper to rework my “cash plan” and realized I might be able to invest some of that money in the market over the long term without jeopardizing my down payment (a.k.a. the “house fund”). I even factored in a few of those new homeowner spending shocks I’d heard so much about, just in case.

As I see with my clients every day, it’s not uncommon to be saving for multiple goals at the same time. But having clear goals in mind and being realistic about how to achieve them have kept me from making mistakes that could have otherwise derailed them.

Principle 2: Balance

In the midst of market turmoil, I focused on 2 aspects of my portfolio I could control: asset allocation and diversification. My asset allocation needed to support my short-term goal of buying a house while helping me save for long-term financial independence in retirement. And diversifying my assets would not only help me achieve those goals, it would also help my portfolio weather market ups and downs over time. These 2 important portfolio characteristics are the key drivers to investment success over the long run.

Maintaining a balanced portfolio (and a balanced mindset!) helped me focus on the big picture: making sure I had enough money for the down payment on my home and investing for the long term.

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