When is the last time you thought about basic investment principles and reflected on how they may impact your decision-making, goals, portfolio, and wealth? We believe this is a great exercise to do! Below are some core principles to help get you started.

Declines in the market may seem frightening when they happen, but it is important to know that declines in stock prices are a normal part of investing. Stocks move in cycles, with periods of gains followed by pullbacks, which is part of the natural market ebb and flow. Instead of dwelling on your portfolio being down 4% during a decline, think about why you own what you own and what opportunities may be ahead in the next investment cycle of seven to ten years. Keeping this perspective may help prevent you from making a bad decision.

Having a portfolio that outpaces inflation over an investment cycle not only builds your wealth but helps maintain future purchasing power. Unfortunately, we have recently seen how inflation can eat away at your ability to pay for the same goods and services you enjoyed just a few years ago. If your portfolio consistently earns less than the average inflation over seven to ten years, you lose purchasing power, because your investments are not growing as fast as the prices of goods and services that you consume are growing. Stocks may provide the best potential to outpace inflation over long periods of time, but that does not mean that your entire portfolio must be stocks. A balanced approach – a mix of stocks and bonds – might be an effective strategy to consider.

It’s understandable that investors may be tempted to pull out in a volatile market. Giving into fear, panic, or other biases often hurts your portfolio’s performance. Making investment choices based on reason rather than emotions takes discipline, but it is key to avoiding poor, irrational decisions.  Investors who take a buy-and-hold approach tend to be more successful than those who move in and out of the market.

Volatility tends to fade over time, and the longer the time period, the less impact you may see on your wealth. Seeing your portfolio over a ten- to twenty-year time span will look dramatically different and tend to be smoother than looking at your portfolio over one week, one month, or one year. At Kletschke Wealth Management Group, we work with our clients to help them maintain a disciplined, buy-and-hold strategy, which is designed to allow compounding to work its magic over the years.

Picking the right mix of assets – stocks, bonds, cash, and alternatives – can go a long way toward the goal of maximizing long-term return without taking on excessive short-term risk. Stock-heavy portfolios tend to have higher returns over time, but with greater swings year to year. Bond-heavy portfolios tend to have lower, but more consistent returns. We help our clients periodically rebalance and review allocations to ensure they are on track toward their investment goals.

Working with a professional financial advisor is another effective strategy to help you remain focused on your long-term goals. Kletschke Wealth Management Group provides experienced insight and a future-focused approach that is designed to help you maintain your investment principles. Contact Kim, Korey, or Tyler for a consultation today!

Investing involves risks, including the possible loss of principal invested. Asset allocation does not ensure a profit or protect against loss. Rebalancing may have tax consequences, which you should discuss with your tax advisor.

Kletschke Wealth Management Group
400 Gold Circle, Suite 220
Dakota Dunes, South Dakota 57049
(712) 252-6931
KWMG@stifel.com