Times may arise when you might think about changing your investment strategy, but be sure to give it careful consideration before you act.
You may take a “set it and forget it” approach to investing. But, over time, life events, the timing of when you need the money, and market events are likely to compel you to revisit your strategy. Here are some things to consider when they arise.
Dealing with life events
Events, both expected and unexpected, like the following could cause a change in your long-term goals and time horizon:
- Marriage, divorce, or remarriage
- Birth of a child or grandchild
- Change in health status
- Job loss, retirement, or early retirement
- Death of a loved one
These types of events may prompt you to revisit your investment strategy, and in fact, they may be good reasons to make changes. Do you need to reprioritize your investment goals, spending, or how much debt you need to pay down?
Before you reallocate your investments, remember to plan with the same careful consideration you gave to creating your original investment strategy.
Responding to market action
In addition to life events, you may want to revisit your investment strategy when there’s market volatility. Is that college tuition/mortgage/vacation payment nearer than you anticipated, making you realize that you may need to be more conservatively invested?
It is worth noting that your time horizon for needing the money is the key factor here. Avoid making emotional decisions based on today’s 24/7/365 news cycle. It can be tempting to react to the headlines when you might be better off simply riding out the volatility if you have a longer time horizon.
That doesn’t mean you should never respond to market action. However, it’s often a good idea to think long and hard before you change or, at the extreme, abandon your strategy.