Sit Tight: How to Avoid Abandonment Risk
You’ve heard the expression, “When the going gets tough, the tough get going.” When it comes to investing for retirement, however, going when the going gets tough isn’t always the right thing to do.
On the same note, going when the going gets easy isn’t always the right thing to do, either.
In fact, investors’ tendency to leave an investment at the wrong time — during good times or bad — is known as abandonment risk.
Abandoning an investment strategy at the wrong time can be costly. It can lead investors either to sell before an investment has reached its peak or, even worse, sell when an investment has dropped in value (thus buying high and selling low, instead of the other way around).
At the root of abandonment risk is emotion. And emotion and investing don’t usually mix.
That’s why it’s so critical for investors to find a financial professional they trust, to help them establish a rational plan they can stick with and avoid abandoning an investment at the wrong time.
Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.