Coronavirus fears have sent the markets into a tail spin over the past few weeks. While this may seem like an unprecedented market event, it’s not. Chances are if you’re a long term investor you’ve been through several of these.
That doesn’t make them any easier or for that matter less scary. With the 24 hour nature of our news cycle you don’t get much of a break from thinking about your investments and at times I’m sure doubt and questions come up.
What should you do?
Stock Market Historical Perspective
First and foremost, keep in mind market crashes can happen quickly like in 1987, or be drawn out like the dot.com bubble bust. We’ve been through World Wars, 9/11, and a mortgage meltdown to name a few. In every one of these scenarios one common theme has emerged, the market recovered.
We can’t predict what’s going to happen next or even how long this current pandemic will last. What we can do is apply history which tells us the market recovers and so do we. Armed with this understanding here are three things you can do to minimize your losses and anxiety during this latest stock market crash.
Wealth Mangement: 3 Tips To Help With Your Investments
Stay The Course – If you’ve listened to me much you’ve probably heard this a ton and probably to the point of annoyance. What this means is stick with your current investment plan. Investing should be long term and that philosophy is born out of times like this. Turbulence makes a market but getting caught up in the emotions of short term swings can wipe out long term potential gains. Too many times I see people decide to sell and say, “I’ll get back in when the market calms down”. Here’s why that can be a really bad idea, according to Fidelity if you invested $10,000 in the S&P500 from 1980 to 2018 but missed the best 5 market days from the time period it would’ve cost you $249,667. The numbers get much worse if you missed the best 10 and 30 days. So if you think you’re going to time the market, you better not swing and miss.
Think Carefully about what you’re investing into during this time – The latest DIY idea is to buy into the problem area because that’s where the biggest opportunity lies. While I love the basic premise of looking for opportunities based off emotionally oversold stocks you have to be careful and evaluate why a specific company has been dragged down to bargain levels. A better idea that provides more diversity for your opportunistic appetite during fearful market times could be to take a look at index ETF’s that will provide you with some diversity to help ensure you’re not buying into the few companies or sectors that aren’t going to recover with the rest of the market.
Turn Off The News – Look I understand you can’t just unplug from what’s happening out there but there comes a point in time when you have to say enough is enough. With a 24 hour news cycle and social media, you can drive yourself crazy with emotion and anxiety. In most cases you won’t even realize it. I challenge you to recognize the trap and step away from your phone, tv, or computer from time to time and live life. It will allow you to gain fresh perspective and fight the paralysis by analysis that comes from too much news.
– Jarrod
Jarrod Adams Investing LLC
[email protected]
10130 Perimeter Parkway
Suite 200
Charlotte, NC 28216
Sources:
https://www.fidelity.com/viewpoints/investing-ideas/six-tips
https://time.com/3741681/2000-dotcom-stock-bust/