Stay Calm Amid Market Declines

How do you feel when you hear the word “investing”? Excited? Indifferent? Scared? Speaking from experience, I’ve felt all these emotions and more. These days, the stock market can swing wildly, making it tough to keep up with the daily buzz in the business world.

Take, for instance, how Argentina defaulted on its national debt, yet its stock market hit record highs. Similarly, in the third quarter of 2014, McDonald’s took a financial hit when consumers in Asia turned away after a tainted meat scandal. On top of that, Scotland is contemplating independence from the UK, causing anxiety for banks and insurance companies about what the future holds. If they decide to break away, big companies might shift their headquarters to the UK.

In short, events large and small are shaking up the global markets. As American investors, we’re deeply affected by these ripples both here and abroad.

KEEP AT IT

Most of us aren’t financial experts. We often pick simple, easy-to-understand investments like mutual funds, ETFs, or index funds. Since these are usually for the long haul, we set them up and leave them alone until we notice the markets dipping.

So, what should you do when that happens? Do you panic and sell off your investments to avoid a meltdown similar to 2008-2009? Many market-savvy folks would advise against this and suggest staying the course.

Many people try to guess where the market is headed by figuring out when to sell and when to buy back in. But if you aren’t keeping an eye on the market daily or evaluating every company in your portfolio, you might not get a clear picture of the economy, making this a risky strategy.

Making snap decisions driven by fear can end up costing you more. Instead of quickly dumping your shares, it’s smarter to hold tight and wait for the market to recover, as it typically does. It’s completely normal to feel uneasy during market dips, but don’t let emotions derail your investment strategy.

SEIZE THE OPPORTUNITIES

Markets can’t rise forever without a break. See downturns as a chance to buy more shares of your existing investments at lower prices. If you believe that stocks and bonds can bring long-term gains, then buying when prices are down makes sense.

This is also a great time to take a look at your current investments to see if they need any changes. Check how your assets have performed over the long term and see if your portfolio still matches your investment goals or if those goals have shifted. Maybe you’ll need more cash in the next five years if you plan to buy a rental property, or perhaps retirement is just seven years away. Significant life changes should impact your financial goals, so factor them in when adjusting your investment portfolio.

Try not to get bogged down by market dips and stay focused on the long-term vision that inspired you to invest. Whatever choices you make during market lows, avoid acting out of panic. Ensure your decisions are carefully thought through and based on reliable information.