HOW TO STAY GROUNDED WHEN MARKETS GET ROCKY
Six years later, the stock market crash of 2020 still provokes strong feelings among some investors.
How could it not? Everyday investors and retirees, like you and me, watched as our retirement and brokerage accounts dropped by as much as 30% or more in just days.
Commonly known as the “Coronavirus Crash,” the crisis began in February 2020, triggered by the rapid spread of COVID-19 and the economic shutdowns that followed. Over the next several weeks, major stocks plunged, with the Dow Jones and S&P 500 experiencing some of their steepest one-day losses ever.
At the same time, rollercoaster emotions like shock, worry and fear ran the highest of highs and the lowest of lows. Most of us couldn’t stop talking or reading about the crash. The need for financial self-preservation was at an all-time high.
The 2020 crisis also created an extraordinary amount of financial “noise,” creating more confusion among investors because stock prices stopped matching real-world business conditions.
THE MARKET WILL ALWAYS HAVE SOMETHING TO SAY. BUT YOU DON’T HAVE TO LISTEN.
Like the steady hum of excitable chit-chat during a party, financial noise is the background stream of information, opinions and predictions about money and markets.
Simply put, it’s the nonstop chatter—what you see and hear on TV and social media, among family, friends, coworkers and the like—that could influence you to make emotionally charged investment decisions.
Financial noise may look like:
Daily stock market ups and downs
Headlines predicting a recession or market crash
Social media investing advice
Experts making conflicting predictions
Short-term economic data and interest-rate news
Fear or excitement driven by market movements
HOW TO KEEP FINANCIAL NOISE FROM DROWNING OUT GOOD SENSE AND YOUR LONG-TERM FINANCIAL PLAN
Doomscrolling is real. Interestingly, a 2024 Morning Consult survey reports that 31% of American adults regularly doomscroll. Among younger generations, that number jumps to 46% for millennials and 53% for Gen Z.
What you can do, however, is take responsibility for your own emotions and actions. First, you must get comfortable with the idea that volatility will occur in the stock market. It’s inevitable, unstoppable.
Learn to live with the inherent tension of market volatility to expertly navigate it over the long term. Here’s how to become more comfortable with it:
Stop checking your social media accounts and subscriptions every day.
Turn off financial widgets and other news alerts that talk about daily price changes.
Say to yourself, “Media makes money from fear and excitement.” Repeat as often as needed to calm nerves.
Treat sudden market crashes as exactly what it is: background noise.
Then …
Resist the temptation to let the noise drown out, or derail, your long-term, wealth-building goals.
A good way to stay focused on your goal is to remember that equity markets, over the long term, tend to rise more than they fall. Since 1947, the U.S. economy has experienced roughly 14 periods, often called “bear markets,” or a 20% decline from a market high to its low.
These downturns have lasted anywhere from a few months to nearly two years. But historically, they’ve been far shorter than the extended periods of market growth that followed.
When uncertainty hits, one of the best strategies is often the simplest: Don’t overreact. Stay invested and give the market time to recover.
Simply put, stay the course.
Staying invested gives your investments time to recover from market downturns, grow through compounding and benefit from future gains. While markets will go up and down, sticking with your plan often works better than trying to time the market. Trading more often can also mean higher fees and more taxes, which can eat into your returns.
Other strategies to stay rock solid amid financial noise:
Measure your success against personal goals like retirement timing rather than reacting to a single day’s market drop.
Set specific dates to review and rebalance your portfolio, rather than making spur-of-the-moment trades during market swings.
Lean on your financial advisor to keep calm when markets get rocky. That steady perspective can help you avoid knee-jerk decisions and stay focused on your long-term plan.
PLAN OVER PANIC
Market volatility and financial noise aren’t a matter of if but when. But you don’t have to let either one drive your planning decisions.
When the headlines get louder and markets get shaky, know what you can control: your goals, your plan and the decisions you make. Give your portfolio the time it needs to weather short-term storms and participate in long-term growth.
When this happens remember:
Turn down the noise.
Stay focused on your goals.
And when markets get rocky, Alia is here to help you keep perspective and stay the course.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.
Disclosure: Content in this material is for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. All investments involves risk including loss of principal. No strategy assures success or protects against loss.
The content provided herein is based on our interpretation of the One Big Beautiful Bill Act and is not intended to be legal advice or provide a tax opinion. This document is a summary only and not meant to represent all provisions within the One Big Beautiful Bill Act.
This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
