It is not unusual for investors to be disappointed when their portfolios are in red. They tend to check portfolios more often when they are near the peak or the bottom. The frequency of checking increases during both peaks and troughs. And, as luck would have it, the time lapse between the two is usually less than two years.
Euphoria unwinds quickly, but it is not the end of the road. It is actually the beginning of a new journey. A new road awaits us and we need to travel on it with refreshing resolve. This has been the experience of seasoned investors after every cycle. But, investors who haven’t actually stayed invested through market cycles don’t have the same experience. They have always entered late into a market cycle, never being prepared for the next cycle, stayed with the same portfolios until it was too late, and failed to create sustainable returns.
This story is very common. But, the good news is that it is avoidable. There is a method to handle investments when cycles turn. One must learn to leave behind one style of investing and show adaptive skills. Get the portfolio choices fresh and right, prepare for a period of negative performance, show conviction in what others refuse to buy, create a system of managing fear, and gradually grow investment confidence. The trick is to do it before the broader market does. Another such opportunity is before us and it is time to create the right setting in our minds and portfolios. That would be the road to creating sustainable investment performance.