While some investors shied away from this week’s political noise, others took advantage of market swings to invest for the long term. I explain what happened and how you can benefit from looking beyond the next four years.
On Friday of last week, the Ibovespa was above 118 thousand points, the long-term public securities negotiated with rates of IPCA+5.6% per annum or 11.7% per annum fixed.
At that moment, many regretted not having taken advantage of it when the Ibovespa was below 110 thousand points or for not having invested in fixed income when rates were above IPCA+6% per year or 13% per fixed year.
The last time prices reached this level was about three months ago. It appeared that these favorable prices for investment were far from repeating any time soon. However, they repeated themselves yesterday and today.
However, instead of taking advantage of the 7% cheaper prices, many withdrew and others even sold in desperation.
Undoubtedly, there is cause for concern. But, you don’t need to invest all your capital at once. If new drops occur, you can make new contributions.
Remember, when the market gets stressed and sells, you should calmly buy some of your portfolio.
When the market is optimistic, you sell some of your risk portfolio, as premiums are likely to be lower.
Even if you have a long-term horizon, it’s important to reduce exposure in high moments to have cash in low moments.
It sounds obvious when you say it, but it’s extremely difficult to execute.
Usually, we get stressed and optimistic along with the market and instead of acting rationally, we are carried away by the general mood. By doing so, you will generally buy high and sell low. This is the first step to frustration with investments.
Knowing how to take advantage of these movements is one of the best strategies for long-term capital accumulation.
Michael viriato is an investment advisor and founding partner of Investor’s House
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