Now is a good time to remember that long-term investment goals tend to survive temporary market shifts.
Any time you see a swing in the markets and a drop in your account balance, emotions are going to arise. Here are some steps on how to soundly evaluate the market conditions rather than making decisions based solely on emotions.
KEYS TO SURVIVING MARKET FLUCTUATIONS:
- BE AWARE of the herd mentality. World events can trigger emotions and cause panic. Even when the Federal Reserve takes action to cut rates to try to stabilize the markets, people can react by selling their investments at the first sign of trouble without adequate information. Herding is when investors copy the behavior of other investors and could sell based merely on seeing others sell. The danger is that you can ‘herd’ based on an investment decision that is wrong for you and your situation. Are you ‘herding’ or making a sound, informed decision for your situation?
- KNOW about the long-term economic outlook. In the middle of a severe market shift it is important to be informed about what is happening yet also to have some perspective on what the long-term implications are. If you were invested in 2008 then you have been through a situation shaped by market decline and Federal Reserve interventions. Markets suffered double digit declines in 22 of the last 39 years, yet still ended those
years with positive returns 75% of the time. Markets do eventually normalize, and when they do, those who stay invested may benefit more than those who don’t. Trying to time the markets is a tricky thing and can cause you to miss out on some of the market’s best days. Which leads us to the third tip…
- ASK your advisor before doing anything. The value of having an advisor is having a sounding board to discuss and calmly review the situation before doing anything reactionary that can end up hurting your long-term savings goals. Your advisor can help you evaluate your unique situation and help you gain clarity during an emotional time. Working with a professional means you don’t have to assess these situations alone.
In the face of increased volatility, we continue to follow our disciplined investment process and monitor our clients' accounts. We welcome any questions you may have during this time.