If you've been watching the market lately, you’re probably wondering if now is a good time to make changes to your investments.
When the market is volatile, it's natural to feel the urge to do something. History shows that making changes just because the market is turbulent is usually not a good idea. If you had a solid portfolio that supported your financial goals at the start of the year, it's probably still the right portfolio now.
However, there are a few exceptions to the rule. If you aren't sure what's in your portfolio, or if your financial plan has changed, it's a good time for a review.
Use some walking-around sense
Every day, there are new headlines of rising inflation, rising interest rates and geopolitical turmoil. When the markets become turbulent, everyone tends to focus on the bad news.
There is plenty of good news to be found if you take the time to look for it.
Unemployment remains at historic lows. U.S. consumers still have cash and access to credit, and continue to do what they do best: spend money.
As an investor, the time to worry is when people aren't working and stop spending money. As long as U.S. consumers continue to work and continue to spend, the economy will be fine.
Investing in companies that make money when consumers spend money is a time-tested strategy for success.
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Know what you own and why
Investments are just one part of your overall financial plan. Each investment you own is like a puzzle piece. It should fit in a specific spot in your financial picture, and it should be there for a good reason.
If your portfolio has investments that you don't understand, or you don't know why you own them, it's time to take a step back and think about the big picture. If you own mutual funds or exchange-traded funds, ask yourself what purpose each one serves in your portfolio. Investors who own individual stocks should have an idea of what each company does, and how that company makes money.
Don't make things more complicated than they need to be. Many investors make the mistake of relying too much on so-called experts, official statistics and fancy infographics. The best investment ideas are usually simple and understandable.
The best portfolio is one that makes your long-term financial plan work. When it comes to investing, a little common sense goes a long way.
Matthew Treskovich is a CPA financial planner and the chief investment officer with CPS Investment Advisors. He can be reached at Matt@CPSInvest.com.
This article originally appeared on The Ledger: Your Money: Volatile markets? Stick to commonsense investing