When you hear the word ‘investing,’ what’s your first thought? Excitement? Indifference? Maybe even fear? I’ve felt all of these at different times. Right now, the economic environment is pretty hectic, with stock markets changing faster than the weather, making it tough to keep up with daily news.
We live in a world where Argentina can default on its national debt but still see its stock market hit record highs. In 2014, McDonald’s took a financial hit in Asia due to a meat scandal. Scotland’s potential independence from the UK makes banks and insurance companies there uneasy about the future. If they do split, big companies might move their headquarters to the UK.
Global events shake up our markets regularly. As American investors, these events, whether they happen here or somewhere else, have a big impact on us.
STICK WITH IT
Most of us aren’t financial experts. We often choose straightforward investment options like mutual funds, ETFs, or index funds. These are usually long-term investments, so we tend to set them up and leave them alone until we notice market drops.
When that happens, what should you do? Do you panic and sell everything to avoid something like the 2008-2009 crash? Most experienced investors would tell you to stay calm and not make any hasty decisions.
Many people try to predict market movements, but this approach means knowing precisely when to buy and sell. Not keeping a constant eye on the market and not regularly assessing your portfolio can lead to costly mistakes. Decisions made out of fear and without proper information can hurt you more in the long run. Instead of quickly selling your investments, it’s better to hold on and wait for the market to recover, like it usually does. It’s normal to worry about your finances during market dips, but don’t let those fears derail your investment strategy.
CAPTURE THE MOMENTS
Markets can’t keep going up forever. Look at downturns as chances to buy more shares of your current investments while they’re cheaper. If you believe that stocks and bonds will give good returns in the long run, buying during low periods makes sense.
Downturns are also a good time to review your investments. Check how your assets have performed over the long term and see if your portfolio still matches your financial goals or if those goals have changed. Maybe you’ll need more cash in the next five years for something like a rental property, or perhaps you’re seven years away from retiring. Big life changes should prompt a re-evaluation of your financial objectives, so keep these in mind when adjusting your investments.
Try to stay focused on your long-term goals that motivated you to invest initially and ignore temporary market dips as much as possible. Whatever choices you make during these low periods, avoid making them in a panic. Make sure they are thoughtful and based on reliable information.