While the excitement of March Madness often centers around Cinderella teams—the ones that come out of nowhere to make a deep run in the tournament—life isn’t all about trying to make three-pointers from half court. Especially when it comes to investments meant to last through retirement. Sustained success for a college basketball program, and in investing, often comes down to consistency, year after year.
Taking That Risky Shot
Of course, there may be times when you might think that taking a risk or making a bold move is necessary to achieve your goals (probably stretch goals at that). A March Madness player who takes a risky shot at a critical moment can sometimes win a game. But that’s in basketball. In investing, you have to really know what you’re doing and consider all risks. It’s difficult to outthink the market, and timing the market is just not something long-term investors try to do. Missing that big shot and losing the game is one thing. Blowing your retirement funds on a hunch is completely different. Listen to your financial advisor coach’s words: Don’t do it!
The Familiar Final Four
Since you probably do follow college basketball, you’ve probably already noticed that many of the same teams make it all the way to the Final Four every year. They have a proven track record of success, a winning plan that they stick to. In other words, they are not flash-in-the-pan teams. It’s the same way with investors. Those who take a consistent, long-term approach to investing are often the most successful in achieving their financial goals, again and again and again.
But what is consistency in investing? It means focusing on your long-term investment objectives, staying committed to your strategy over time, and avoiding impulsive decisions based on short-term market fluctuations—volatility.
Good Investors Don’t Choke
Let’s keep going with this basketball analogy. Just like basketball players need to make quick decisions and take risks to succeed, investors need to navigate the ups and downs of the stock market and make strategic moves to maximize returns. But what happens when the pressure is on and the stakes are high? Just like a basketball player can get nervous and “choke,” even when taking free throws, investors can also become overwhelmed by market volatility. Unfortunately, that’s when they make impulsive decisions that lead to losses.
Again, this is exactly why it's so important to take a long-term approach to investing. Focus on your overall investment objectives and stay committed to your strategy, even during times of market turbulence. In fact, there may be times when it's better to sit on the bench and wait for the right opportunity to jump back into the game. During times of high volatility, for example, it may be best to hold onto cash reserves or invest in safe, low-risk assets until the market stabilizes.
By keeping a cool head and avoiding impulsive decisions, investors can minimize risk and stay on track to achieving their long-term goals.
The Takeaway
So as you watch the excitement of March Madness unfold, remember that while it's always nice to root for the Cinderella teams, it's the consistent, disciplined programs that make it to the Final Four year after year that ultimately achieve the most success. It also means sticking to a disciplined approach to investing, sometimes avoiding the flashier “plays” and sticking with the tried and true layup.
In investment terms, this means going with historically strong companies with excellent leadership. Companies that pay dividends aren’t always the ones that make the headlines. But they are the ones who tend to make you money. By applying these lessons to your own investing strategy, you can stay focused on your long-term goals and achieve sustained success over time.
Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice. J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at jlbainbridge.com and https://adviserinfo.sec.gov/firm/summary/108058.
