Mistakes to avoid in times of stock market volatility

Investors are getting hit with news of stock market volatility they haven’t seen since the beginning of the COVID-19 Pandemic. There are a few significant and problematic topics in the news headlines ranging from Russia invading Ukraine, the ongoing global COVID pandemic, and inflation, to name a few.

These negative headlines could lead some to make costly investing mistakes.

If you are a day trader or speculate on the hottest stocks of the day, you should likely make major adjustments to your investment portfolio based on short-term news. On the other hand, if you invest for long-term goals like retirement or financial freedom, making significant adjustments to your financial plan based on daily news will greatly reduce the odds of reaching your various financial goals.

Doing nothing may seem counterintuitive, but it is often the best course of action for those with a well-thought-out financial plan and diverse investment allocation. If you had a crystal ball and knew what the stock market would do every day, timing the market would be easy. The reality is that no one can successfully time the stock market consistently over time. You just need to be right too often.

While a bear market is never fun, it is far from a crash wiping out the vast majority of the value of your portfolio. If you have been investing over the past few years, you likely have only lost some of the gains you made during the recent stock market run-up. Stock market correction and bear markets are a normal part of the stock market cycle and do not mean we are heading to the next great depression or repeating the financial crisis of 2008.

Warren Buffett famously said:

“Be fearful when others are greedy, and greedy when others are fearful.”

If you wait until all the news headlines are positive, you will have likely missed months, or even years, of positive stock market returns. When times get tough, you may be tempted to go to cash or stop contributing to your investment accounts until things calm down or the stock market has left a correction or bear market. But there will always be a reason to be negative.

One option is to set up automatic contributions to your investments, so you buy when times are good and bad, and to have a diversified portfolio that is consistent with your financial needs and goals.

If you would like to discuss the above in more detail, please contact your financial planner.

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Source: Techlink