Don’t panic over stock market volatility

DATE | 02/28/20
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As we finish out February 2020, markets are poised to extend their period of correction based on global events. Understandably, the news about the downward direction of the stock market may cause you to feel some anxiety and confusion.

But watch your emotions. Despite our best intentions to act rationally, basic impulses and emotional responses can influence our decisions, often against our better judgment.

There is an old saying on Wall Street that the market is driven by just two emotions: fear and greed. Succumbing to these emotions can have a profound and detrimental effect on your portfolio. “It’s tempting to sell stocks when things look shaky and buy again when the outlook is bright. Such market timing almost never pays off because no one really knows what will happen next,” advises Brenda Echeverria, Financial Planning Supervisor at Member Benefits. “Just as greed dominated the market back during the dotcom boom, the same can be said of the prevalence of fear following its bust. In a bid to stem their losses, many investors dumped their stocks, but in doing so they lost any opportunity to recover their losses when the stock market rebounded.”

The best thing you can do right now? Don’t panic. We’ve had market corrections before. History clearly illustrates that the market will drop some days sometimes for weeks or months, and the market will go up some days sometimes for weeks or months.

Accept the predictable unpredictableness of the market. If you’re thinking “easier said than done,” remember:

  • Retirement accounts are set up for long-term investing, and the expert advice is typically to remain invested even when stocks are down. Better to ride out market slumps, focus on your long-term goals, and try to ignore short-term volatility.
  • Mutual funds are generally not designed for frequent changes/trades. A well-diversified portfolio will help alleviate some of the effects when a correction occurs.

If you are experiencing more volatility than you’re comfortable with, it might be wise to take a look at your portfolio. Take advantage of Member Benefits’ expertise. Log in to your account at yourMONEY, or contact us at 1-800-279-4030 if you need help or have questions.