October 2021

Best Investing Approach: Have a Plan, and Stick To It

There are many things that can affect the performance of the financial markets – and you as an individual investor can control virtually none of those things. For example, recently the markets have been reacting to slower-than-hoped progress controlling COVID-19 infections and the effect of that on the economy, including lackluster U.S. employment numbers and disruptions to the supply chain. There also has been uncertainty about increasing the debt ceiling and passage of an economic plan, as well as rising gas prices and the effect on family budgets and the movement of supplies. There are some things you as an individual might be able to do about these issues: Take COVID-19 precautions, reach out to your government officials, ramp up hiring if you have a business.

But for the most part, these things are outside your control. Too often, investors respond by reacting to market movements. But almost by definition, if you are reacting, you have missed the opportunity to get out ahead of an event. Experts emphasize that it rarely makes sense to adjust your strategy in response to what the market is doing day-to-day. If you try to time the market, you are likely to get in too late or get out too early.

So what should you do? First, look at the whole picture rather than at the crisis of the moment. Currently, the whole picture is relatively positive. Overall, earnings are good, and signs point to them continuing to be good as companies adapt to the post-pandemic business model. The Federal Reserve seems committed to a money management approach that promotes recovery. Demand for goods and services remains strong -- so strong that it often outstrips the available resources.

Beyond that, choose an investment strategy that gives you the best chance of withstanding short-term market movement. Often your best protection against market fluctuations is to choose an investment strategy that is less dependent on short-term ups and downs. At Peachtree Investment Partners, we believe in focusing on the long-term fundamentals. We think that having a strategy that is based in sound economic principles gives you the greatest likelihood of success over time. You might not experience the gains from picking just the right investments at just the right time, but you also might avoid the losses that can happen when the market does not perform exactly as you expected.

First, we focus on the stocks of large American companies that have strong and experienced leadership, a clear idea of where they are going and how they plan to get there, and a long track record of success. We choose companies with continued good return on investment and a history of consistency in revenue and earnings growth.

We also almost exclusively choose stocks that pay dividends. We believe this helps your portfolio in some important ways. First, dividend-paying stocks help protect your portfolio against market volatility by providing returns that do not come solely from an increase in the stock price. In addition, reinvested dividends can help to grow your portfolio significantly over time.

Then we hold those investments. Of course, we can and do make adjustments from time to time, if either your circumstances or outside events call for it. But for the most part, we build a portfolio for the long run, and then we let it do its work.

We are always happy to talk to you about your investing needs, or any other questions with which we might be able to help you. We wish you all the best for the fall and the holiday season to follow.

Garry K. Schaefer
October 26, 2021

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