During times of market volatility, it can be tempting to panic and sell off assets in fear of losing money. However, financial experts advise against this knee-jerk reaction, emphasizing the importance of staying invested and sticking to your long-term financial goals. Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, suggests that investors should approach market downturns with the same mentality they would have when shopping for discounted goods at a grocery store. Just as you would stock up on essential items like paper towels or toilet paper when they are on sale, Sun recommends identifying quality stocks that you would like to add to your portfolio when the market dips.
Opportunities in Market Pullbacks
The recent market pullback on Monday saw the Dow Jones Industrial Average drop by 2.6%, the Nasdaq Composite by 3.43%, and the S&P 500 by 3%. Despite the initial panic, Sun views these pullbacks as opportunities to invest in core names or quality portfolios at a discount. “Today you’re getting to buy it at a discount,” she notes. “It’s better to buy things on sale than to buy at full price.”
As tempting as it may be to sell off assets during market downturns, financial advisor Clifford Cornell warns against straying from your retirement goals. Cornell emphasizes the importance of staying invested and maintaining regular contributions, even when the market experiences volatility. “Turning off your retirement contributions is really not the way to go, especially when the market gets volatile,” he advises. It’s crucial to remember that markets have historically shown resilience and recovered from downturns.
The Biggest Mistake to Avoid
One of the biggest mistakes investors can make during market downturns is to sell off their assets out of fear, according to CFP Stacy Francis, president and CEO of Francis Financial. By doing so, investors risk missing out on potential gains when the market eventually rebounds. Francis cautions against reacting impulsively to market fluctuations and emphasizes the importance of staying focused on long-term financial goals.
In a JPMorgan Asset Management analysis spanning nearly two decades, it was found that seven of the market’s 10 best days occurred within two weeks of its worst 10 days. This highlights the importance of staying invested and weathering market volatility with a long-term perspective. Despite the unpredictability of the market, investors can control how they react to fluctuations, which ultimately determines their long-term success.
Looking Ahead: Volatility Leading Up to the Presidential Election
As the presidential election approaches, experts anticipate continued market volatility. Stacy Francis warns investors to brace themselves for fluctuations in the market and emphasizes the need to remain focused on long-term financial goals. While the market may experience ups and downs leading up to the election, it’s crucial for investors to stay disciplined and avoid making impulsive decisions based on short-term fluctuations.
Ultimately, the key to navigating market volatility lies in maintaining a long-term perspective and staying focused on your financial goals. By adopting a disciplined approach and resisting the urge to react impulsively to market fluctuations, investors can position themselves for long-term success. Remember, markets will inevitably experience ups and downs, but it’s how you respond to these fluctuations that will ultimately determine your financial future.