I know—the stock market has experienced several ups and downs recently. And if you have been jarred by the recent rollercoaster ride, you are not alone. The apparent instability or concerns over a future down market has caused many to wonder whether or not they should continue investing. You may be one of them.
Here is my request—don’t make any major moves just yet. Take a breath. Rash investment decisions are often bad investment decisions.
Here are a few ways to avoid making rash investment decisions during a turbulent market:
- Consider the historical performance of the market. Click on this link. View the charts under the heading “Stocks.” You will notice something obvious—dips are nothing new to the stock market. It goes up, and it goes down. However, the overall trajectory of the stock market has been positive.
- Consider your long-term goals. Investing is a long-term game. If you are not planning on retiring for several years, these moments of volatility should not be a great concern for you. Your concern is the overall trajectory of the market, not the one-day, one-month, or even one-year performance.
- View down markets as moments when everything is on sale. Buy low, sell high. This is your formula for success. Assuming that you have several years before you will need your retirement funds, you should get excited about times when you can buy investments at a reduced cost. In fact, you may want invest more money, not less during these times. Just like a store-wide sale, your dollar goes further during down markets. So when the market pops back up, you have a greater number of shares that will go along with it. This is why Warren Buffet says, “Be fearful when others are greedy, and be greedy when others are fearful.”
Of course, I don’t condone greed. But you get the point.
Your ability to weather market storms may be the difference between postponing retirement and being retirement-ready. Don’t bail on the market just because the market seems to be bailing on you. 2008 was a terrible year for the market. But it was a great year for those who kept investing. Those who invested their money during that down market watched their money grow in remarkable ways over the next decade.
So calm down. Breath. And don’t make any rash investment decisions.