Market Volatility is Nerve-racking
In 2022 markets have been volatile and have declined. There have been many factors that have caused the volatility. I’m not going to debate what’s causing the decline, but I’m going to make some suggestions that will help your portfolio.
Negative Returns
Through March 7th, the returns have been abysmal. The S&P 500 is down 12%, the Nasdaq is negative 19%, and the Russell 2000 is minus 14%.
It’s nerve wracking and uncomfortable to see your account values decrease day after day. I understand that you are experiencing feelings of fear, uncertainty, and gut-wrenching pain. The desire to sell is understandable. Doing so seems like it will make the pain stop. But if you did not know the correction was coming, how will you know when to get back in before the market takes off?
Positive Outcomes
More importantly, it is a good but tough decision to stay invested. There will be short term pain for long term gain. The best decision is to make additional investments while they are trading for a discount. This decision is the hardest emotionally, but the easiest logically. Buying during a time of volatility will pay off handsomely in the long run.
For instance, I wrote about buying pizza when it was on sale. Suppose that you like eating pizza that usually costs $10 a pie. All of a sudden, one day, your favorite pie costs $7. Instantaneously, you can get a lot more pizza for your money. The same principle applies with stocks. You can buy quality companies at cheaper prices and get a lot more for your money.
Future Outlook
You are probably wondering if the market will continue to decline? When will it go back up? Your guess is as good as mine. Furthermore, don’t let the fortune tellers mislead you into believing they know when it will. What I do know is that buying investments at a discount will lead to a more secure financial future.
As a point of comparison, what action did you take in March 2020? If you didn’t sell and you kept your money invested, your portfolio is worth substantially more since then. If you purchased more investments during that volatile time, your portfolio is worth substantially more.
What investments have you made over the last week? What questions do you have about market volatility?