I got to thinking the other day about how silly it would be if people approached the weather the way they approach their investment decisions. Here's how it would work.
A few rainy days would come along. The news would run a story that said something like "Most Rain In One Day In Last 5 Years". The commentators would begin saying, "Yards and travel plans devastated by rain. What should you do now?" Umbrella and sump pump sales would soar. About this time, the rain would subside, and the sun would come out. The problem is, no one would get to experience the sunny days, because they would be hunkered down hiding under their umbrellas just in case a new rain cloud should come along.
And this, my friends, is exactly how many people invest. When turbulent times come along, they put their money in something that often locks them into walking around under an umbrella for five to ten years. They miss years of sunshine.
There's a better way. It involves creating an investment plan that you can stick with. You can do this with an asset allocation plan designed for retirement. There are a few ways to approach this, and I cover three of them in 3 Ways to Construct Your Asset Allocation for Retirement.