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Fasten Your Seatbelt!

Fasten Your Seatbelt!

| October 26, 2022
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Remember how fun rollercoasters were when we were kids? We waited in line for what seemed like an eternity – all for the highs and lows of the ride that made us scream with delight and fear. Once we were buckled in and grabbed the safety bar, we were ready to go. That was a ride we chose to step onto, compared to the investment rollercoaster which is one that we didn’t necessarily choose – yet here we are!Market rollercoaster

The year to date and especially over the last 4-6 weeks, the markets have acted in a way that can play with one’s emotions. We do suggest though, that as challenging as it is, emotions should be tucked away when making any financial decisions. Letting your emotions and the rollercoaster of the market dictate your buying and selling habits will likely not lead to the success anyone is hoping for.

As shown in the chart, emotions can cause a person to buy when the markets are at the top and sell when they are at the bottom - the opposite of what anyone should be doing. Although short-term market conditions make you want to have a knee-jerk reaction to change your portfolio - remain calm and focus on why you are investing. You need an “in-it-to-win-it” mindset during these long-term and short-term waves that are part of the economic cycle.

When things are great with our investments, we feel invincible! Conversely, when things take a downturn, we are prone to being reactive. Because emotions can be such a threat to an investor's financial health, it is important to know how to keep one’s head above water, keep your seatbelt buckled and hold the safety bar tightly on the rollercoaster of investor emotions.

Investors tend to see short-term volatility as the enemy. Volatility may lead many investors to move money out of the market and “sit on the sidelines” until things “calm down.” Although this approach may appear to solve one problem, it creates several others, by going to the sidelines:

  1. You may be missing a potential rebound. This is not historically unprecedented.
  2. You could be not only missing a potential rebound, but all the potential growth on that money going forward. You must make two correct decisions back-to-back; when to get out and when to get back in.

Now, what do you do when you’re on the rollercoaster? We believe the next step is to review your plan and decide if any action is necessary. This reality check placates the natural desire to “do something,” and at the same time helps keep emotions in check. Our Insight FORMula helps remind us to focus on the things that we can control that overlap with what matters most to an individual. Let us know if you want to talk more about the rollercoaster, how to keep it all under control and what to do now.

 


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. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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