Stocks head for another potentially treacherous week, as a slew of retailers report earnings— CNBC
Your pulse quickens, and you can feel the tension build in your veins.
What do I do now with my investments?
It’s relatively simple to be a long-term equities investor when the markets are on a tear. But, human nature makes dealing with a down market challenging.
If you are investing for the long term, one powerful tool at your disposal can help you stay the course.
When we incessantly watch and track our investments, we feed the ill-feeling in our gut as markets tumble. Any financial expert will tell you that selling when the markets are down is a huge mistake.
The time to buy is now. And that’s the case always as an investor who will buy and hold for the long-term. When you remove your emotions from your investment strategy, you will enjoy more success and less stress.
Those who try to time the market are doomed to fail in most cases. Even the best experts cannot predict the future of the market.
Set your investments on autopilot and continue to contribute to diverse funds regularly, regardless of the current state of the market. Stop trying to predict market performance and trust that your contributions build your future wealth.
This strategy is proven.
This strategy is boring.
People like excitement and stress. Look at all of those sports gambling commercials. People can now bet on sports in 30 states plus the District of Columbia. The odds are not in your favor, but the thrill of a chance to win draws big money. Coloradans wagered $505M in March 2022. Those commercials also boast the ability to bail out on a bet when you don’t feel so good about your choice.
Like selling an investment in a down market, pulling your sports wager back is a guaranteed loser.
If you gamble, don’t treat your long-term investments like a wager. Better yet, don’t gamble. Send those wagers off to work for you in your investment account instead.
Google a bit, and you will find articles highlighting what you would have if you invested at the bottom of a historic market decline. On the one hand, articles like this tell a good story about staying the course. Yet, you can also receive the message:
You can time the market and make out like a bandit.
Investors who successfully ignored the dramatic declines during the 2008 crisis and continued to invest like clockwork also faired well—no need to stress when to sell and when to hop back in.
These investors saw their portfolios take a colossal hit, over 50%, from October 2007 to March 2009. And then saw their investments roar back and through the roof.
By unplugging emotions, this group of investors could stay the course and reap the benefits of buying in a down market.
People who chose to sell struggled to find the right reentry point. Timing the market is a huge gamble, and very few people get it right. The rest of us suffer from stress and then miss out on a golden opportunity to buy when equities are on sale.
None of us know what will happen in the future. Inflation could run wild for years, and the stock market could continue to tank. The world could right itself, and the economy could take off again. Or, something completely different could happen.
The more energy you expend trying to predict the future, the more stress you bring into your investments.
You can create a low-stress investment life when you contribute to a diversified portfolio and continue regardless of market conditions. The strategy requires a fundamental belief that markets will rise in the long run.
If you don’t believe in the long-term potential of the markets, perhaps investing in equities is not for you.
Investing in equities for the long-term is not a get-rich-quick strategy. This practice does create passive income. Something that so many people strive to attain. It takes time in the market to create wealth and the passive income you seek.
You win when you disconnect your emotions and play the boring buy-and-hold game. Your investments will get the time in the market they need to grow, and you will buy your way through the peaks and dips of the market.
The practice is hard, especially if you’ve never invested in a down market before. Your emotions will tell you to sell, cut your losses, and get out now.
I still have to fight back emotions, even after living through the 2008 crisis and reaping extraordinary returns for the discipline to stick to the strategy.
These days, I check CNBC and Google Finance a lot less.
I have faith that the markets will recover in the long run, but that doesn’t stop my emotions from telling me lies today.
Take control of your emotions and remind yourself why you are investing. Your strategy is to create wealth that you can live on for the rest of your life. What happens today, or even this year is only a blip on your journey.
Rely on your strategy and automated investments, and stop checking the financial news 50 times daily.
I wrote that as much for me as for you.
We need to remember that emotions shouldn’t drive investments. A down market is a true test of your emotional control. Take some deep breaths and press on.
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