Groundhog Day is almost here.
For most of its history — which, according to some reports, dates back to the first celebration in 1886 or 1887 in Punxsutawney, Pa. — Groundhog Day held little significance for most Americans.
But that changed in 1993 with the release of the movie Groundhog Day, in which a semi-embittered meteorologist, played by Bill Murray, is forced to re-live the same day over and over again. He repeatedly makes poor choices, until he finally learns from his mistakes and is granted the ability to move on with his life.
Since the movie came out, the term “Groundhog Day” is often used to refer to a situation in which someone repeats the same mistakes. It’s a phenomenon that happens in many walks of life — including investing.
So, how can you avoid becoming a “Groundhog Day” investor? Here are some suggestions:
- Don’t chase after “hot investments.” Many investors make this same mistake over and over — they hear about a “hot” investment from a friend, relative or television commentator, and they buy it. Too often, though, by the time they purchase this investment, it’s already cooling down. Even more importantly, it just might not be suitable for them. So instead of pursuing “hot” choices, pick those investments that are appropriate for your needs, goals and risk tolerance.
Although the financial markets have trended up in the long term, we’ve seen many down markets that have lasted for a year or longer. Factor in these fluctuations when estimating the rate of return you’ll need to achieve your goals. For these types of calculations, you may want to work with an experienced financial professional.
These and other “Groundhog Day”-type investment mistakes can be costly. But you can avoid them if you maintain a solid investment strategy, if you’ve got patience and perseverance — and if you stay focused on the long-term horizon.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.