From the course: Financial Basics Everyone Should Know
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Determining when to adjust assets
From the course: Financial Basics Everyone Should Know
Determining when to adjust assets
- [Instructor] If investing is like a personal hobby of mine, surfing, then I can tell people the one most important thing about managing stocks is to stay on your board. Don't buy or sell based on your emotions. Lots of people panic. Ride out the waves. Do not panic or change your investment in stocks just because they're going down. Set a certain amount in an investment, which we call an allocation, and then stick with it in good times and bad. When you adjust your assets, adjust them based on your expected rate of return and your needs for the future. Your expected rate of return is how much you reasonably expect to earn on an annual basis. Let's talk about what the stock market as a whole has returned in the past 60 years. Since 1966, the S&P 500, a group of 500 large stocks, has returned an average of 11% each year. That's a pretty good rate of return, but it hides an important fact. Returns fluctuate a lot. A one or 2% move per day is common, and the markets frequently fall at a…
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