One of the greatest dangers to your wealth may not be the market’s dips and dives, it may be the temptation to make emotionally charged decisions regarding your wealth.
As an investor, it’s important to remember what your biggest focus should be: your personal economy.
During market turbulence, it is easy to panic and allow our emotions to get the best of us. Let's look at what affect this can have on your investments and what you can do about it.
Market Confusion
In a perfect world, the stock market would be predictable. Economists, professors, and investors alike have studied the markets for decades, even developing theories and models to explain and predict trends and responses in the market.
Here's the problem: Money, and the way we interact with it, isn’t black and white. As humans, we typically cannot make objective decisions regarding our own money.
Whether we realize it or not, we are influenced by subconscious biases and what we read and hear on the endless news cycle.
The Fed is hiking rates, war in Ukraine...
S&P 500 earnings season is off to a good start...
Inflation and supply chain disruption...
Google is splitting 20 for 1...
Employment data is strong...
But the yield curve is inverting!
On it goes - creating emotional confusion that can pull investors in different directions and make hasty decisions.
Cycle of Emotions and Your Portfolio
Even the most disciplined investor could have a tough time staying strong during turbulent economic climates. With social media and 24-hour news cycles, no one is immune to hearing about breaking news or troubling trends.
When you hear on the news that the market has plummeted, your first instinct may be to get out immediately. This is a gut reaction, fueled by the short-term fear of a market crash.
However, now’s the time to remember the truth about your investments: they’re meant to be a part of your long-term financial goals, not short-term gains.
If you keep your investment portfolio updated for current market conditions as well as your true risk tolerance, you can get through these periods of market uncertainty.
When in Doubt
To help avoid making impulsive, emotionally charged decisions about your money, talk to your financial planner. They can give you guidance and reassure you as to why your are in your current portfolio.
The market is meant to cycle, and using strategic, logistical planning is one way you can stay focused through these uncertain times.
It’s important to remember that a financial planner can act as a buffer between your emotions and your investments. With shifts in the market, you can use strategies, reallocate certain assets, or make adjustments as needed.
This decision, however, should be based on facts, logic and experience, something your planner should help you with.
During times of economic uncertainty, remember to keep calm, stay rational and remain informed about your investments as well.
I'm here to guide and help you reach your goals, especially in times like this, so feel free to reach out with your concerns and questions.
John Piershale, CFP®, AEP®
John Piershale Wealth Management, LLC is an Investment Adviser registered with the State of IL and in other jurisdictions where exempt from registration. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.