Staying Calm When the Market Isn't
Cable news networks provide content every minute of every day, which means they have an interest in continuing to report on the same news story—even when nothing has changed. Our smartphones ding constantly throughout the day, bringing news we often didn’t ask for to our fingertips. This constant barrage of news and information makes it easier to stay informed but significantly harder to determine what’s important. Further complicating things, markets around the world tend to respond to the news. That’s why, for example, there is often significant market volatility in election years such as this one.
It can be incredibly difficult to stay disciplined, especially when the news media uses words like “plummet” and “soar” to describe the market, but remember that one of the most fundamental and important investing concepts is “buy low and sell high.” It sounds intuitive, but in practice it generally means buying when the market is underperforming and selling when it’s performing well. We have an innate emotional tendency to buy high (when markets are good) and sell low (when markets are bad), but this actually minimizes return potential, as investments would be bought when they’re most expensive and sold when they’re worth less. However, a long-term financial plan is designed to help you “buy low and sell high” and, importantly, withstand short-term market fluctuations.
Planning ahead can prevent panicking later. For example, buying an umbrella when it isn’t raining better prepares you for when it is. If you wait until it’s raining to buy an umbrella, you may not be able to find one or it may cost you more than it should. Right now, the market is in the middle of a storm, but the savviest and most disciplined investors prepared for it ahead of time by seeking a personalized investment plan reflective of risk tolerance, time horizon, and individual goals.
Remember: round-the-clock news with attention-grabbing headlines and their effect on the market can be alarming, but staying calm, staying disciplined, and staying the course is key to achieving your financial goals.