Is the stock market adding to your list of woes? You’re not the only one, just these past few weeks we’ve seen a steady drop in the stock market, causing a nationwide panic for what this could mean. In moments like this, many will pull out from their investments to prevent financial loss. Unfortunately, this strategy only deepens problems for the market. Let’s not forget that the Great Depression was triggered by an economic scare that caused Americans to collectively pull out everything they had from the stock market. There was nothing left to carry an economy after that!
I would say that when we see the market drop considerably, only in rare or very specific circumstances should you jump off the bandwagon of your investments completely. Before making any big decisions, we’ll talk about a few trends in the market to help you to gain more confidence and make wiser financial choices. Here are 4 mindsets to have when dealing with the ups and downs of the stock market:
- Sudden drops, recessions, and stagnant periods are normal
The market has cycles that seem to occur every two years. Up two years, down two years, and so on. A recession typically occurs every 25 years. But despite these cycles, the market always makes its way back up and breaks the ceiling of prior years. Refer to this graph of our rising stock market since the Great Depression.
- Think long-term
Sometimes monitoring stocks on a daily basis isn’t an effective way to make decisions about what to do with your money. Unless you’re investing in some high-risk stocks, you shouldn’t have to monitor them every day or even every week. Making wise decisions about where to invest your money and anticipating that there will be sudden drops in the market caused by a variety of external factors will help you keep in perspective that these are short-term issues in your long-term goal.
- Don’t listen to fear
Your phone buzzes. “MARKET TAKES A DIVE…” a news update flashes across your screen. Your blood pressure may increase as you think about all your stocks and the possibility you would have to pull out. You may make a call to friends or family members who encourage you to do the same, but if not, logging on to Facebook might do take care of that too. People are moved by fear, and it spreads like wildfire on social media. But let me tell you, when the market takes a turn for the worse, don’t turn to fear. It’s tempting to want to pull out all of your stocks, but keep in mind your long-term goals and that normalcy of this occurring. Also keep in mind that unless the world is ending, the market will always make its slow climb back up.
- Go to an expert
Sometimes it pays to have a professional manage your stocks. For one, they probably know more than you about the stock market and how to invest wisely. If you are busy with your own career or family, I would encourage you to consider the benefit of having a professional manage your stocks to fit your risk tolerance and long-term goals, as well as cut down on general anxiety. Make sure they are certified professionals at what they do and are seasoned dealing with the ups and downs of the stock market. In the end, this would potentially be of benefit to your general well-being as it will take the stress off of you for managing your investments.
Overall, the stock market cannot be predicted on a day-to-day basis. Anyone who says otherwise is not someone you should trust with your finances. But the market does have measured patterns that we can gauge, and it continues to grow. It may take time, but with the right investments and a commitment to financial goals, you could potentially have better earnings in the long-term.