With all the news of a recession, it is natural to be concerned about your investments.
Investors who witness the market volatility and bearish markers are bound to feel some fear about how their investments will perform.
The thing that you have to remember though, is that market corrections and crashes plus economic downturns are all part of the investment cycle. These have happened before and will happen again.
Therefore, it's vital to handle this calmly (and not panic!). And most importantly, you must remember that when things "fall", selling is not an option! Neither is switching.
My team at finexis often tell our clients to not switch because switching in itself entails selling first which means realising a loss. Please do not do this unless you are certain you know what you are doing. Instead, we advocate investing for the medium to long term, so that you can ride out any volatility that comes your way. Our suggestion is to turn away from the current paper value of your investments and keep your eyes on the goal.
In most cases, the goal is to achieve Financial Freedom. As someone who helps clients, I don't like to see losses on paper too but I know markets will rebound, and that bearish markets are always short-lived. So instead of selling, tell yourself that the option you should go for is buying! In fact, if you have extra cash on hand, I recommend you to consider investing a portion of that since markets are at a discount.
Here are some additional pointers to help you decide what to do during economic downturns - courtesy of Investopedia:
Downturns are followed by upturns
It can be challenging to watch market prices decline and not pull out. However, research shows that the average duration of a bear market is about one year, compared with approximately four years for the average bull market. The average decline of a bear market is 30%, while the average gain of a bull market is 116%.
Reminder: a bear market is temporary. The subsequent bull market erases its declines and can extend the gains of the previous bull market.
The big risk for investors is missing out on the major gains in the market to come. While the past is not a predictor of the future, it should provide some assurance that what goes down does tend to go back up.
You can't time the market
Timing the market is incredibly difficult. Investors who engage in market timing invariably miss some of the best days of the market. As a result, instead of selling on the way down, try buying. Accumulating more shares in a regimented way, even as stocks fall, allows you to dollar cost average and build your portfolio with a lower cost basis.
The plan? Stay invested!
Long-term investors with a 20- or 30-year investment time horizon who remain invested despite drops in the market most likely will see a smaller negative effect on their portfolio values than investors who sell during downturns and get back in later.
As a long-term investor, stay true to your investment goals and have a sound investment strategy. A well-diversified portfolio with a mix of asset classes can keep volatility in check.
If you keep the focus on your long-term investment strategy, emotions like fear and greed shouldn't affect your course of action. If you contribute a certain amount to your portfolio each month, keep doing that despite market ups and downs!
I hope the above gives you some assurance at the very least.
The worst you can do is SELL.
The least you can do is HOLD.
The best thing you can do is BUY.
If you like to find out more, feel free to schedule a call to discuss further @ calendly.com/gladys-tan