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dollar cost averaging, investing, investor induced oscillations, market fluctuations

TSP Fluctuates, but your strategy should remain constant

If you’ve been watching the stock market fluctuate over the past several weeks you’re likely a bit dizzy. If you haven’t been following the news, it’s been a wild rides with some of the market’s biggest dives and climbs in history! Want to join the chaos? Try to decide what’s going to happen this week!

Or, forgettaboutit.

Previously I’ve written about the phenomena of pilot induced oscillation. As a primary jet instructor pilot I had to teach my students that sometimes the very best thing they can do is relax their death grip on the controls, take a breath, and focus on the horizon. By trying to predict the airplanes next move, the student pilots (and even some seasoned pilots) would over-correct, setting the airplane into increasingly dramatic ups and downs. In the worst cases I told the students to let go of the controls completely. If the aircraft is properly trimmed it will quickly return to the desired flight path. In a financial context, if your portfolio is properly weighted and diversified, if you leave it alone and continue to make your contributions over time, you fly right through these oscillations and come out the other side with either a lot more shares purchased at lower cost, or a higher account balance because of the higher stock prices (and hopefully both!)

So, relax, put the business page away, read a book and play with the dog. Put your investment accounts in the hands of seasoned professionals at TSP and good mutual funds. In other words, put your investing decisions on autopilot and enjoy the ride. As Dave Ramsey has said, the only person who gets hurt on a roller coaster the the person who jumps off in the middle.

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