Rising costs. Constant negative news.
Add to that seeing your portfolio take a hit – it can all be unsettling.
It’s natural to feel the urge to pull out and wait for better times, a reaction known as loss aversion. It’s when the pain of losing feels much worse than the joy of gaining.
So when markets dip, many people rush to sell, which can push prices down even further. But trying to time the market by exiting before a drop and reentering at the perfect moment is extremely difficult. It’s also often unsuccessful.
Reacting to sudden market changes usually isn't a wise strategy. Markets are unpredictable and can experience temporary rises and falls that mislead even seasoned investors. For long-term investors, it’s often better to review your portfolio occasionally rather than watching it daily. For example, if you had invested in the S&P 500 and then ignored the market for a year, you might find significant gains despite any short-term drops.
No one can predict the market’s future. Attempting to do so can be detrimental, as those who sell during downturns often miss out on the recovery that follows.
Interestingly, some of the best market days often come right after the worst ones. Such is true in life – and in investments.
During volatile times, there are still opportunities for smart investments. Consider adding these to your strategy.
- Create a plan: Focus on what you can control and align your investments with long-term objectives. Discuss with your advisor to prepare for market swings and keep a diversified portfolio.
- Invest regularly: Keep investing consistently, even during market turbulence. This strategy can help you buy undervalued stocks. Consider setting up automatic investments to maintain this habit.
- Consult the experts: Use expert advice to navigate downturns. They can help with portfolio rebalancing, tax strategies, and finding value in undervalued stocks.
- Limit withdrawals: In a bear market, reducing withdrawals can help preserve your portfolio’s growth potential. Consider postponing non-essential expenses until the market improves.
The key to successful investing is – you got it – patience.
Trust your long-term plan and remember that staying invested over time, rather than trying to time the market, is the best strategy for growth.
Isn’t it time we talked?
