For most people, investing is a long-term game. You aren’t looking for a quick score to get an influx of cash you can spend on a new Sea-Doo; rather, you’re looking to slowly but surely build wealth so that you can fund your retirement, pay for your kids’ college education and generally make sure your family’s life is as good and secure as possible.
With the market currently somewhat volatile and economists giving mixed messages about the economy generally, it can be hard for investors to remember to think about the long game. Financial services firm Charles Schwab, though, has a few things to remember as you go about your long-term investment plans.
For more help with managing your portfolio during a difficult economic period, consider working with a financial advisor.
Tip One: Bear Market Aren’t Forever
For the first time in years, there is a bear market in the United States. A bear market is one where prices are generally selling, encouraging people to sell. This can be discouraging to wait-and-hold investors, who will see the value of their portfolio dropping.
Schwab stresses, though, that long-term investors should remember that bear markets do not last forever. A review of the S&P 500 going back to the 1960s found that the average bull market lasted six years, while the average bear market lasted just 15 months. The longest bear market was two-and-a-half years, and was followed by a long bull market.
In short — don’t get discouraged. This won’t last forever.
Tip Two: Resist the Urge to Sell
If you wake up everyday and see the value of your portfolio nosediving, it can be very tempting to cut your losses and exit the market entirely, reentering at a later date. Unless your financial situation really calls for it, though, the best move is to stick it out. As mentioned above, eventually the market will rebound, and you don’t want to miss out on the early growth days, which is where the biggest leaps tend to be, according to Schwab.
A diversified portfolio can make sticking out a downturn easier, so take care when you’re building your financial plan to not put all your eggs in one basket.
Tip Three: Market Timing is For Suckers
Market timing is a strategy where you buy and sell stocks with the purpose of taking advantage of a specific jump in value you expect to happen quickly. Schwab is very clear about the idea:
“It’s nearly impossible. Time in the market is what matters. While staying the course and continuing to invest even when markets dip may be hard on your nerves, it can be healthier for your portfolio and can result in greater accumulated wealth over time.”
Even seasoned professional investors can’t be sure they won’t mess up a market timing play, so it just isn’t worth trying it as an amateur.
The Bottom Line
Things are a bit scary right now for investors, as we’re in a bear market with an uncertain economy. There are three things you can do, though, to get through: remember it won’t last forever, resist the urge to sell, and don’t even think about trying to time the market.
- A financial advisor can help you navigate the current market. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- The best place to start investing is at work. If you have access to a workplace retirement plan like a 401(k), make sure you use it.
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