Over the last several months or so, the stock and bond markets have both decreased significantly. Inflation, war, and interest rate hikes are just a few of the major causes of the hectic market. Regardless of the cause, market volatility can cause all kinds of emotions. Stress, concern, confusion, and the feeling you are on an actual rollercoaster just to name a few. So, what is to be done with these intense emotions?
Fight or Flight
When our body feels like it is in danger, it defaults to one of two classic responses: fight or flight. We can look for the nearest exit and high tail it out of there, or we can stand our ground, look fear in the face and show it who’s boss. In the case of a wild animal attack, you may be better off running, but when faced with the apparent “danger” of a market downturn, I say fight.
Please don’t misunderstand, as your financial advisor, I’m certainly not suggesting you fight us. We are on your side anyways. What I mean is that you should fight the feelings of fear, uncertainty, and worry. As much as we talk about numbers and percentages with our clients, investing can be just as much an emotional game. When the market suffers and we feel like selling all of our investments for fear of loss, that’s when we most need take a deep breath and hold onto them. On the other hand, when the market is soaring at record highs and we feel like it will never go down, we should get more conservative. In other words, don’t let your emotions (positive or negative) drive your investment decisions.
If you’ve made it this far and managed to stay in the boat when others have already jumped ship... Congratulations! You may be in position to take advantage of an opportunity. Past performance is no guarantee of future results, but if history repeats itself, then the stock and bond markets should return to their high points last year and then some. If you are fortunate enough to have cash burning a hole in your pocket, now could be your time to buy up undervalued assets on the market. Investors can use recessions and market downturns as an opportunity to potentially increase their wealth and make above average returns.
If you find that you do have the resources to capitalize, now is a good time to meet with us to help you determine how to invest it. If you are already heavily invested and feeling on the fence about what to do, don’t let yourself act out of fear. Stick to your commitment as a long-term investor and let your patience reward you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. No investment strategy assures a profit or protects against loss.