A natural reaction many people have during market volatility is to sell their stocks and turn as many of their investments into cash as possible. The problem with this is it’s more based on emotional reactions than thoughtful investment strategies. If you think about it, panic-selling mainly locks in your losses. A better strategy usually is to do nothing at all, but there are some other options and investment strategies you can consider when you feel a little panicked about market volatility.
Invest Extra Cash Into The Stock Market
If you have some extra money on top of the emergency fund you have set up, then you can consider investing it into the stock market. Market volatility has a perception of being intimidating and instills fear in a lot of people, but some investors thrive on it. With extra cash to invest, you can buy stocks at lower prices than normal, which allows you to have better returns than you normally would. You could also consider simply investing your extra cash into the retirement accounts you already have set up, whether it’s through your employer or other accounts like an IRA.
Set Up Automatic Investments
One of the best ways to avoid the urge of panic-selling is to set up automatic investment contributions. This means putting in the same amount of money into an account monthly, or even quarterly. By doing this, you’ll be taking advantage of market volatility when it hits low points by buying shares at lower prices. When the market is peaking, you won’t be able to buy as many shares for the same amount of money, but the concept of dollar-cost averaging is in play and keeps your returns stable rather than fluctuating with the market.
Maintain A Long-Term Investing Perspective
One of the most important aspects of achieving financial success is maintaining a long-term perspective on your investments. Unless you’re getting ready to retire in the next few months or up to a year, market volatility shouldn’t impact you significantly in the long-term. History tells us markets have peaks and valleys, so making panic decisions based on either side usually won’t help your long-term outlook. Having the discipline to stay on the course you set forth with your advisor is important, and you may even need to speak with your advisor about any financial anxiety you may be experiencing.
At Stock Investing Info, we help clients maintain their long-term outlook on their investment strategies, while also helping them understand the current volatile state we are in. Panic-selling is rarely a good choice to make, even during the most volatile situations. You don’t always have to make a move based on what you hear in the news, and sometimes the best decision you make is to do nothing at all. If you ever feel uncomfortable with market volatility and what it means for your investments, contact us and we will walk you through your options.