I hear it every day, from everyday investors: How can I succeed in the market?

The truth is, while it’s one of the top questions on people’s minds today, maybe even yours, there’s really no easy answer. Investing can seem like you’re riding a rollercoaster at times, with so many twists and turns to navigate when it comes to staying on track with your financial plan. Volatility, inflation, and ongoing recession fears only create more bumps in the road when managing your portfolio, not to mention the fact that nearly 20% of adults grew up without receiving practical investment education.

While you may experience plenty of ebbs and flows in the market, whether with your 401(k) plan or brokerage account, it’s important to remain disciplined even when things get tough in our economic environment.

I call it “controlling the controllables” -- and it’s a key principle to follow when investing your hard-earned money. Too often, people worry way too much about financial events they have no power over, like interest rate hikes, which can sway you away from reaching your goals.

It’s almost like playing sports; you can’t predict the outcome of the game or what your opponent is going to do, but you can train for every situation. You can practice so you are well prepared. That doesn’t guarantee success, nothing  can, but controlling the controllables gives you the best chance for achieving the desired outcome, regardless of what comes your way. I always tell my kids, “Do your best and forget the rest.” Think of your investment approach the same way by focusing on the aspects that you have control over.

Check your tech

Will history repeat itself?

Time will tell.

But it’s hard not to think about the dot-com crash in the early-2000s, when the tech bubble burst and the stock market collapsed. As of November 2023, technology stocks represent approximately 27.5% of the S&P 500. In 1990, tech stocks peaked at around 29.2% of the index. That similarity doesn’t mean a crash is coming, but it does highlight a vulnerability that exists today, especially when you consider that nearly half of that tech concentration is just two companies — Apple and Microsoft.

In general, most clients I speak with are overweighted in technology stocks at the moment, with at least a fourth of their external portfolios invested in tech stocks. Many who self-manage their investments have considerably higher concentrations and are often unaware of that fact and the risk it brings to their financial plan.

To me, that’s a red flag. 

Some investors have this mindset that they’re going to swing for the fences, and either strike out or hit a home run. The winning strategy may just be to get on base. To put it another way, if there’s no reason to take more risk, why should you?

I’ll give another analogy: If you’re already on pace to get to your destination on time, do you need to drive faster than the speed limit or weave in and out of traffic? Think about what could go wrong if you take that unnecessary risk. Just because there is a possibility you may arrive sooner doesn’t mean you will — and it doesn’t mean the risk will be worth the potential reward.

That’s why it’s critical to consider the following.

Diversify, diversify, diversify

I’m not breaking any news here, but when it comes to your investment portfolio, “not putting all of your eggs in one basket” is one of the most fundamental investment principles that can help you minimize your overall risk.

What exactly does that mean? Simply put, you need to wear your seatbelt and you need a car with airbags. You may have a flawless driving record, but the person in the lane next to you might not. You may feel that since you’ve never been in an accident, that it’s all in your control, but it’s not. Diversification can protect you from getting distracted, a lapse in judgment, or an uncontrollable event.

With this logic in mind, it’s a good idea to diversify your investment portfolio across all sizes, styles, and sectors so you have more exposure to the entire market where you aren’t placing too much trust in one company, or so that one segment won’t drag you down too far. That’s something you can “control,” as referenced above. Being properly allocated across the equities, fixed income, alternatives, and cash can give you a better chance of achieving positive results during difficult periods.  

The bottom line

Many investors wonder how they compare with their peers’ investment portfolios. While it’s a totally reasonable question, my first response is usually, “I don’t think that matters. This is your plan.” It’s important to understand that people have different values, interests, and passions that can influence the decisions they make with money. You may love to travel abroad. Someone else your age may enjoy owning season tickets to their favorite football team. Some may just want to settle down and live the simple life. At the end of the day, all require a financial blueprint that fits, guides, and ultimately supports a particular lifestyle and specific goals.

Working with a financial professional can help you review and rebalance your investment mix as your needs evolve so you’re not blindsided by any turbulence in the market. After all, as you get older and closer to retirement, your priorities, goals, and objectives will evolve — and the risk you want to take on may change as well. A financial professional can help assess your situation and make necessary course corrections along the way.

Investing can be a tricky behavioral exercise at times, so it helps to have access to resources that can help make money management as  stress-free as possible.

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