[Money] 3 Reasons Not to ‘Panic Sell’ in a Falling Stock Market
[Money] 3 Reasons Not to ‘Panic Sell’ in a Falling Stock Market
Keeping emotions in check and reaping the financial benefits of courage
Fears that fast-moving Delta Variant of the coronavirus will put the brakes on a return to ‘social norms’ and economic recovery in the U.S. and abroad weigh is weighing heavily on stock prices.
A surge in new investors, courtesy of micro-investing apps like Robinhood, means many people are facing market turbulence and shrinking portfolios for the first time.
The Long Haul
It is important to remember that stocks are still the best game in town when approached as a long-term investment. The average 10-year stock market return is 9.2%, according to Goldman Sachs
A good rule of thumb is to only invest money in the stock market that you will not need for the next 3 to 5 years. That’s a lot easier said than done, however, when we see the size of ou
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Keeping Your Emotions In Check
That makes it imperative that we keep our emotions in check. Keeping these 3 tips in mind may keep you from making a premature exit from stocks at the expense of future returns.
1. You haven’t lost a penny until you sell: It’s important to remember this when you see scary headlines or hear fearful ‘water cooler’ chatter about plummeting markets. Despite its ups and downs, The Dow Jones Industrial Average has had an average return of about 7.75% from 1921 to present. Ride out the storm, and give your stock investments time and space to do what they do best: Grow.
2. Don’t train your brain to make financial decisions based on fear: Fortunately for our physical safety, but unfortunately for just about everything else, the reptilian part of our brain is programmed to respond to fear in the ‘hear and now’ at the expense of logic. Money is so tied to our sense of survival that watching our portfolios plummet or our assets shrink on paper will literally throw our minds and bodies into a fight or flight response. Take a deep breath and reconnect with your long-term financial goals when you sense you’re letting fear run the show. Give your brain experiences that show it that you don’t have to give into panic.
3. Warren Buffett is right: Buffett is famous for saying It’s wise to be “fearful when others are greedy and greedy when others are fearful.” In other words, don’t follow the crowd over a cliff. Heed the billionaire’s advice, and see lower stock prices for what many of them are, great buying opportunities.
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Know Thyself – Master Your Fears
When it comes to investing, there are many things to consider. For example:
• Your tolerance for risk: You don’t want the markets keeping you up at night.
• Your time horizon: Many experts agree that money you will need in 3 years or less should be in less risky investments like bonds or cd’s.
• Your long-term goals: Today’s economic challenges make investing essential for many of us in order to create long-term financial security.
Our minds can’t tell the difference between real or imagined fear. It’s up to us to bring our powers of discrimination and reason into our decision making.
