Whether markets are trending up or down, investors can benefit psychologically and financially by focusing on their time horizon.

Say it’s a period when the market is down and you’re saving for a long-term goal, such as retirement. You may feel anxious if you think only about your portfolio value, but it’s important to keep in mind that downswings and upswings are normal and expected. What matters is achieving your investment goal when you actually need the money.

Psychologically, it’s helpful to focus on the long-term objective and recognize that, historically, markets have trended upward over time. Financially, a down market is a buying opportunity. You can purchase shares or fund units at lower prices, gaining the potential to boost your portfolio value when the market recovers.

Avoid over-monitoring

The opposite behaviour to focusing on your time horizon is constantly checking your portfolio balance when markets are down. Aggressive investors who actively buy and sell stocks have a reason to always stay on top of their investments. However, long-term investors with well-diversified portfolios don’t need to continually check their portfolio value—becoming vulnerable to unnecessary worry. You may be fine checking every three months, or whatever period is comfortable for you.

If markets are rising

Your investments and asset allocation are normally based on a combination of investment objective, time horizon and risk tolerance. But the time horizon factor dominates when you’ll soon need to access funds for any goal with a defined target date, such as a first home, post-secondary education or retirement. At that point, every investor should typically focus on lower-risk, secure investments. This shift may require discipline if markets are rising, when some investors are tempted to hang on to their equity investments. But that’s taking a chance. By adopting a time-horizon mindset and taking the safer course, you won’t risk falling short of your financial goal if markets fall.