Another day, another Trump tweet. August saw volatility return to financial markets as investors digested the latest trade and economic news (and tweets).

Investing is an emotional process and can be most challenging during periods of volatility. We are often our own worst enemies. We react based on fear and greed. We focus too much on the here-and-now. This can have a real negative impact on your long run investment performance.

Having a considered investment plan, and more importantly sticking to it, can help you navigate uncertain times.

Bad news sell papers, but should not drive investment decisions

In these days of iPhones and 24/7 news, we are constantly bombarded with provocative news headlines and commentary. It can be daunting trying to make sense of it all and what it means for your retirement savings.

So why do news providers run with these headlines? Bad new sells papers. Emotional headlines are there to grab your attention. If we make investment decisions based on these headlines, we are potentially making a mistake.

“Time in the market” not “timing the market”.

The performance of investors in Peter Lynch’s Magellan Fund is a good illustration of how we can defeat ourselves.  Lynch oversaw returns of 26% p.a. during his 13-years running the fund – almost twice that of the underlying stock index. Despite these amazing returns, he estimated the average investor in his fund only returned 7% p.a. Why was this? Investors got in and out at the wrong times – selling during volatile times or after periods of bad performance and buying after the fund had done well. Buy high, sell low is rarely a winning strategy!!