OPINION: First-time investors have only endured one market cycle. Do these four things to be prepared for changes, writes Certified Financial Planner professional Amy Richardson.
An extraordinary number of people began investing for the first time during the COVID-19 pandemic, and it’s exciting to see how engaged they are about entering the market. At Schwab we call this cohort of new investors “Generation Investor” , and our research shows that they make up 15% of all current U.S. stock market investors. With so many beginners starting their investing journey at once I thought I’d offer them four pieces of practical advice.
I love the combination of energy, engagement, optimism, and pragmatism that Gen I brings to investing. These aren’t just careless speculators, but an eager group of new investors looking to understand and learn. At the same time, a unique thing that Gen I investors share is having only seen one market cycle. But market cycles change, and new investors have to be prepared.1. Do a stress test – Every investor must know their risk tolerance, and it can be hard to measure when markets are rising.
3. Avoid drift—As markets rise and fall, your portfolio can drift. Consider repositioning assets that have become oversize in relation to the rest of your portfolio and move that money into positions that have become undersized. Staying invested is key to long-term success, but being a prudent investor requires trimming from positions that have increased and caused a portfolio to get out of alignment.
Amy Richardson is a Certified Financial Planner professional with Schwab Intelligent Portfolios Premium, Schwab’s hybrid digital advisory service which combines a fully automated investment portfolio with a comprehensive financial plan and unlimited guidance from a Certified Financial Planner professional.
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