- Checking your account can create unnecessary stress and perhaps worse, may end up pushing you to act when you shouldn’t. Remember, self-isolation sometimes can mean distancing yourself from your portfolio when the market is down.
- A smart strategy is to create a long-term plan with a regular investing schedule, and stick with it.
- Timing the market is a fool’s errand. To reap the biggest gains, you usually have to be invested at the lowest points. But, if you’re investing for goals 10 years down the line or more, then dips actually represent a buying opportunity.
Has the recent stock market volatility left you feeling a bit queasy about your decision to start investing? Me, too! As I continue to watch my investments decrease in value week after week, I’ve thought about withdrawing all my money. But no, I’m not going to do that.
For many of us, this is probably the first time in our adult lives to experience such chaos with the stock market. So, what do you do in a situation like this? Do you withdraw all your money, stick it out or buy cheap stocks?
Well, if you’re young and have a few years or decades until you need the money, stay invested!
Avoid Making Emotional Decisions
As you’ve probably experienced, investing your money can be quite a rollercoaster ride. When the market is high, you feel euphoric, but when it goes down, the lows are accompanied by feelings of disappointment. Indeed, investing can feel like a battle between your head and heart, with your hard-earned dollars.
It’s hard to stay calm when every time you browse the internet, all headlines are screaming that this is the beginning of the end and that you will only lose more money. It can be hard to ignore the emotional pull to sell every stock when the market is experiencing volatility. In fact, most professional money managers, regardless of years of experience, often struggle with the same dilemma.
Your investing decisions ought to be based on your own financial needs, not dictated by market movements. Rushing to buy while stocks prices are lower is just as emotional a reaction as selling when they’re up.
Self-Isolate From Your Portfolio
The reality is, no one likes losing money. Although self-isolation is easier than ever these days, it’s not realistic to avoid the news completely. However, that doesn’t mean you should check your portfolio every day or even every week. I have made a decision to stop looking at my portfolio for now.
Normally, investing entails that our accounts fluctuate each day. Other times, like now, the market swings are much more volatile than usual. Checking your account can create unnecessary stress and perhaps worse, may end up pushing you to act when you shouldn’t. Remember, self-isolation sometimes can mean distancing yourself from your portfolio when the market is down.
Remember To Buy And Hold
You’re always told to buy low and sell high, but sometimes, you just need to buy and not sell. Why, you ask? Well, whether you buy stocks in an up market or a down market, you are more likely to earn strong, positive returns if you buy stocks to hold for the long haul.
A smart strategy is to create a long-term plan with a regular investing schedule, and stick with it—although that plan should also include building up a cash reserve for making new investments when the price is right. This way, you’ll be ready to make smart decisions whenever a buying opportunity comes along.
Remember to keep the big picture in mind. If you’re saving for a big, important goal —retirement, your wedding, down payment, or world tour — and it’s more than five years from now, your investments will more than likely recover. That’s why buying and holding a portfolio of diversified investments is effective for most long-term investors.
In fact, the president of BlackRock recently sent a note to investors stating that “history has shown us that missing days when the markets are rebounding can be costly to your future. In fact, since 1987, every major decline in the U.S. stock market has reversed itself between 21% and 68% within the next 12 months.“ So there you have it, stay invested!
Lastly, Do Not Try To Time The Market
Timing the market is a fool’s errand. To reap the biggest gains, you usually have to be invested at the lowest points. But, if you’re investing for goals 10 years down the line or more, then dips actually represent a buying opportunity. Think of it this way, if you find out that something on your shopping list has gone on sale, you’d definitely buy it and enjoy the savings, right? Stocks should be no different. If you’re already planning to invest, buying while prices are down can be a smart move.
To sit on the sidelines during each of these downturns would mean missing out on potentially some of the most profound price rebounds. Put another way, you have more to lose by bailing on the market than you do by riding it out.
Selling off your stocks now and moving into “safer” investments like bonds or cash, or making any sort of investing decision based off of current headlines, is not the best idea. If you take a look at this table, you’ll notice that historically, if you can ride out the downturns in the markets, stocks should gain in value over the long term.
If you still have years or decades until purchasing your house, your wedding, retirement, or a specific long term financial goal, continue making regular contributions to your investment account. And if you don’t have a long-term financial plan, start by crafting one and sticking to it, this is the best thing you can do for your mental health and your financial well-being, especially in the event of the stock market falling or a potential recession.