Make Sure Your Investment Decision-Making Is Inside-Out

SMI believes you can make most investing decisions with little regard for what’s happening in the investment markets. We realize that seems counterintuitive, but let us make our case. Then, we’ll apply it to the question of deciding whether now is a “good” time to sell some of your stock holdings.

For other investors, the starting point of decision-making is “inside” information. The focus is on their own financial needs and a personalized long-term strategy designed to meet those needs. Their buy/sell decisions are based on what’s required to ensure their financial holdings are in accord with the game plan.

We’re encouraging you to be an inside-out thinker. In other words, make your investing decisions like other consumer purchasing decisions. For example, if your family has grown to the point that you need a minivan to haul everyone around, you wouldn’t buy a sporty little convertible because a magazine article said they’re “hot” at the moment. Or, if you need a medicine that lowers your blood pressure, you wouldn’t let a glowing recommendation from your druggist convince you to bring home the leading antihistamine for allergies instead.

It would be foolish to let irrelevant external influences (outside-in thinking) steer you into making such inappropriate purchases. Instead, you make your decisions based on your needs at the time, irrespective of what the marketplace would like to sell you.

“This is obvious!” you say. Yet, people have difficulty applying this consumer mindset to their investing decisions. Many investors have been whipped around by the market’s volatility this year, selling in fear when the market plunged in June, only to buy again after it rallied in July/August. Much better to be guided by a well-defined strategy, such as those provided by SMI, than to be whipped around by outside-in factors such as what the “experts” are predicting will happen next.

Outside-in thinking will never tell you whether it’s a “good” time to sell stocks because no one knows what the market will do in the coming months (as evidenced by the continual reporting of conflicting opinions from Wall Street’s bulls and bears).

Here’s a checklist an inside-out investor might run through to decide whether to make portfolio changes.

Focus on what matters