Take a positive look at negative numbers
Sticking with a long-term investment strategy is tough when markets rise and fall dramatically. It’s easy to lose sight of the big picture when the current outlook appears cloudy.
- Keep in mind that what matters most is the ultimate value of your investments in the future — when you’ll actually need the money. Even if you’re nearing retirement, most of your portfolio may still have a 10- to 30-year time horizon.
- Focus on the number of shares you own, not what they’re worth today. A program of regular investing allows you to purchase more shares when prices are lower. Investing at lower prices can reduce your average price per share. Of course, regular investing doesn’t guarantee a profit or protect against a loss, and you must be willing to keep investing when share prices are declining.
- Remember that experience matters. More than half of American Funds portfolio managers have at least 20 years of investing experience; 28% have at least 30 years.
- Keep your perspective. It might be difficult to look at your statement today, but remember that markets are cyclical. Generally, they can move up or down — or they can stay flat. No one can predict the timing or severity of market declines, but history has shown that down markets have eventually recovered.
Use your statement as a compass
Your quarterly statement is more than just a collection of numbers. It’s a map of your investment strategy. Ask yourself the following questions as a starting point for interpreting your returns:
- Have my retirement goals and time frame changed? Scaling back your goals or changing your retirement date can have a significant impact on your current investment strategy. Be sure to take these factors into account.
- Is my current investment mix in line with my goals? Remember that your strategy doesn’t have to change just because the markets have. But if your goals have changed, you may need to modify your current asset allocation. For instance, you may find that your portfolio has become too heavily weighted in one or two types of investments (e.g., too much allocated to growth funds or cash-equivalent funds). To reach your new goals, you may need to make adjustments.
- Am I comfortable with my investments? Examining each investment within your overall portfolio is also important. Those that fit your goals and asset allocation in the past may not be appropriate going forward. Some things to consider include the investment objectives, expenses and long-term results of your holdings.
You can find more information and tools to help you review your investment strategy under What is asset allocation?.
Talk to an expert
Don’t forget to schedule regular appointments with your financial professional. Your employer can give you the name of your plan’s financial professional if you don’t have your own. He or she can discuss your retirement goals and investments with you and help you make informed decisions.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional or downloaded and should be read carefully before investing.