The only adage that can be applied with 100% accuracy when it comes to investing is that the market hates uncertainty.
These last few months have been tough. Just as it felt like most of us started to catch our breath from the COVID-induced insanity of the last two years, global financial market volatility has come roaring back. The war between Russia and Ukraine, spiking inflation, and an anticipated series of interest rate hikes have started to stoke concerns about a recession.
Thanks to the internet, we are kept abreast of events around the world 24 hours a day, seven days a week, 365 days a year. This constant flow of news often features unpleasant surprises that are out of anyone’s control. Experiencing emotional reactions is nearly inevitable. When the bad news is related to financial markets, these reactions can be especially hard to ignore—no one likes to lose money!
This typically leads to panic and a burning desire to do something (anything!) to make it stop. And that’s where many investors falter. Instead of buying at a low price and selling at a high one, that panic leads to emotionally-driven decisions, causing them to buy high and sell low.
Making panic-prone decisions is one aspect of undesirable investor behavior. The other one has to do with incorrect beliefs about how the market should perform.
While most investors experienced the brief (but frightening) COVID-induced market downturn of 2020, many have yet to live through a sustained selloff. Older investors’ memories of volatility from decades past (such as the global financial crisis or the bursting of the late 1990s’ tech bubble) may be softened by both time and the eventual recovery of any losses they suffered back then. This lack of recall—whether missing altogether or simply clouded by recent events—can lead investors to develop unrealistic expectations about future market performance.
It’s precisely in times like these when working with a financial advisor can help. A professional advisor can guide you through choppy markets and keep you on track to meet your goals (instead of timing the market, which almost always fails as it involves knowing both when to get out AND when to re-enter).
If you’ve never worked with an advisor, here’s your chance to meet with one—at no cost and with no future obligation: click here to schedule an appointment.