Don’t Make This Basic Investing Mistake 

• 3 min read

Man golfing with a bar chart overlaid.
Sure, stocks look hot right now, but this mistake can haunt you when the market turns scary.

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Man golfing with a bar chart overlaid.

QUESTION: Shouldn’t I be investing more in the stock market since it’s been doing so well lately? 

ANSWER: Thirty years ago, when I was learning to play golf, I remember topping the ball and watching it skid 50 yards down the range. I carefully lined up my next shot determined not to make the same mistake. As I watched the pelt of turf sail through the air several yards farther than my ball, my instructor said, “The reason most golfers miss their next shot is because they were thinking about their last shot.”  

The same is true for investors.  

Human nature gears us to worry about the last trade. When we sell stock just before the market goes up, we want to correct the mistake by buying back in at higher prices. Whether you call it recency bias, superstition or the fear of missing out, the emotional pull to buy back in is very real and very strong.  

Here’s how you protect yourself: 

  • As long as you have some equities in your portfolio, you are never really missing out. While you may not have participated 100%, you still own the stocks that are rallying.  
  • A prudent, successful investor never participates 100% in any sector expansion. Why? Because they have a diversified portfolio that is invested in other sectors as well. 
  • Rallies often end unexpectedly, and the last thing that happened before the rally ended was the market going up.  
  • Achieving your financial goals means making good long-term returns and avoiding the mistakes that create heavy losses. 

Don’t let what just happened impact your thinking about what happens next. I don’t know if the current rally will continue for a day, a month or two years. Neither does anybody else. What I do know is that rallies end, often suddenly. All things being equal, the higher the market goes the less return there is to make before the rally ends, and the greater losses will be when the market finds its next bottom.  

You and your advisor constructed a long-term portfolio based on your goals and the relative risks and returns available in the market. As long as the outlook remains steady, and your needs and goals haven’t changed, you should stick to the plan and avoid making a bad golf shot. 


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This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such. AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.

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