Market corrections hurt. They can come out of nowhere. And when they do, they ignite fear, amplify worries, and set off alarm bells.
It’s hard not to panic when that happens. And it’s tempting to react and want to pull back.1
Many people give in to that temptation.2
Informed investors don’t.
Why?
Because they know most market corrections are short.
In fact, over the past 70 years, corrections have been getting shorter and shorter. These days, the average correction is over within four months.3
Those are just a couple of reasons why you shouldn’t panic over corrections. Below are more.
If you know these facts about corrections, you can keep a level head and healthy perspective whenever the markets retreat. That can help you avoid overacting. It may even open your eyes to new opportunities.
“You chose your investment strategies to support your needs and objectives. Market turmoil doesn’t change that.”
Trade PANIC for POISE in a Market Correction
No one likes losing. And no one’s immune from it. In the inevitable correction, that can be a rough reality.
But it’s not the end of the story. Correction panic doesn’t have to upset your portfolio.
You’re smarter than that.
Remember, you chose your investment strategies to support your needs and objectives. Market turmoil doesn’t change that.
During a market retreat, that can be hard to keep sight of—especially when you don’t know if you’re dealing with a short-term dip or a prolonged pullback.
So, what should you do when markets retreat?
Take a deep breath.
Don’t trip over yourself trying to make sudden moves. Ignore the media hysteria.
If you’re feeling nervous, turn off the TV. Stay off the internet.
Then, remind yourself that market corrections are normal and healthy.
Think about the solid, rational reasons you had for choosing your investments. And, remember, history shows us that corrections and recoveries come unannounced.2
If you can stay calm and can see past the temporary shakeups, you can potentially be in a much better position to enjoy the eventual recovery.
As advisors, it’s our job to provide a calm, reassuring presence during times of turmoil and uncertainty. We’re here to help our clients avoid panicked reactions and stay focused on the big picture.
If you’re having a hard time staying cool when markets retreat, let’s talk. Now may be a good time to reassess your financial strategies and risk tolerance. If you need to make prudent changes or switch gears, I’ll let you know.
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1 – https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/loss-aversion/
5 – https://thedecisionlab.com/biases/loss-aversion
6 – https://www.cnbc.com/2020/02/28/heres-what-can-happen-if-you-flee-the-stock-market-for-cash.html
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.