What’s your immediate reaction to the word ‘investing’? Excitement? Apathy? Terror? As an investor, I can tell you that I’ve experienced all these emotions and more. In the current economic environment, stock markets fluctuate more rapidly than the seasons, making it challenging to navigate daily business happenings.
We’re in a world where Argentina defaults on its national debt while its stock market soars to record highs. Likewise, McDonald’s felt a financial pinch in 2014’s third quarter as Asian consumers reacted to a tainted meat scandal. Scotland is mulling over the idea of UK independence, leaving their banks and insurance providers nervous about the future. Should a separation occur, large organizations could move their headquarters to the UK.
In brief, events of all magnitudes are jostling global markets around. As American investors, the ripples of these events, both home and abroad, affect us deeply.
STICK WITH IT
Most of us aren’t financial wizards. We usually opt for simple, understandable investment options such as mutual funds, ETFs, or index funds. Since these tend to be long-term, we usually set them up and let them be until we notice the markets slipping.
What do you do when that happens? Do you panic and rush to sell your investments before a market crash resembling that of 2008-2009 occurs? Many market savvy people would advise against this, suggesting that you remain steadfast.
Regrettably, many try to predict the market’s movement, requiring them to know when to sell and when to buy back. Not monitoring the market daily or not assessing every company in your portfolio can paint a blurry picture of the economy, making this strategy a poor choice.
Wrongly informed, rushed decisions led by fear can cost you more in the long run. Instead of hastily selling your shares, it’s wiser to hang tight and wait for the market to bounce back, as it always does. Feeling uneasy about your financial security during market dips is normal. It’s important, however, not to let your feelings get in the way of your investment plans.
CAPTURE THE MOMENTS
Markets inevitably can’t keep climbing without end. See market downturns as opportunities to buy more shares of the investments you already own while they’re discounted. If you have faith that stocks and bonds can yield long-term returns, then buying when rates are low is logical.
This is also the perfect time to reassess your existing investments to know if they need adjusting. Review the long-term performance of your owned assets and evaluate whether your current portfolio aligns with your investment objectives or if these have evolved. You might need more cash within the next five years for buying a rental property, or perhaps you’re seven years from retiring. Any significant life changes should influence your financial goals, so consider these when altering your investment portfolio.
Try to disregard market downturns to some extent and stay focused on the foresighted long-term that initially prompted you to invest. Whatever decisions you make during market lows, avoid acting in panic. Always ensure your decisions are well-thought-out, based on credible information.
