What comes to mind when you hear the word “investing”? Do you feel excited, indifferent, or maybe even scared? As someone who’s been investing for a while, I’ve felt all these emotions and more. In today’s economic climate, stock markets can change faster than the weather, making it tough to keep up with the daily changes in the business world.
We’re living in a time where Argentina can default on its national debt, yet its stock market reaches all-time highs. Similarly, McDonald’s took a hit in the third quarter of 2014 due to a meat scandal in Asia. Scotland is contemplating independence from the UK, which has banks and insurance companies on edge about what the future holds. If Scotland were to separate, big companies might relocate their headquarters to the UK.
In short, events around the world, big and small, are shaking up the global markets. For American investors, these events can have significant impacts both at home and abroad.
STICK WITH IT
Most of us aren’t financial experts. We usually go for straightforward investment options like mutual funds, ETFs, or index funds. These are typically long-term investments, so we set them up and then mostly leave them alone unless the markets start to drop.
What do you do when that happens? Do you panic and sell your investments quickly, fearing a market crash like in 2008-2009? Many experienced investors would tell you not to do that and to hold steady instead.
Trying to predict the market’s movements means knowing exactly when to sell and when to buy back, which is nearly impossible without daily monitoring or constantly evaluating every company in your portfolio. This approach often leads to poor decisions made out of fear, which can end up costing you more in the long run. Rather than rushing to sell, it’s usually better to stay put and wait for the market to recover, which it always does. Feeling anxious about your investments is normal during market dips, but it’s crucial not to let those feelings disrupt your long-term plans.
CAPTURE THE MOMENTS
Markets can’t keep going up forever. View market downturns as chances to buy more of the investments you already believe in at lower prices. If you trust that stocks and bonds will deliver long-term returns, buying during a dip makes sense.
This is also a good time to reevaluate your current investments to see if any adjustments are needed. Look at the long-term performance of your assets and decide if your portfolio still matches your investment goals or if those goals have changed. Maybe you’re planning to buy a rental property in the next five years, or you’re seven years away from retiring. Significant life changes should influence your financial goals, and those should be reflected in your investment strategy.
Try not to get too caught up in market downturns and stay focused on the long-term reasons that motivated you to invest in the first place. Whatever decisions you make during market lows, avoid acting out of panic. Make sure your choices are thoughtful and based on solid information.