Our very own Marcus Holzberg, CFP® was recently featured in an article from Bloomberg. In it, he shared his insights on what to do when a market plunge makes you anxious about your investments.
In our recent newsletter, we examined the recent stock market downturn and its causes. We also provided historical context for how frequently varying degrees of market downturns occur. If you have not already read it, go and check it out here.
In the newsletter, we highlight the importance of having an investment plan before you start investing. This prevents you from making irrational, emotion-driven decisions when the stock market inevitably faces volatility.
As uncomfortable as sticking to your plan and staying the course may be, it helps you maintain a disciplined investment strategy and positions you to seek the long-term returns the market offers. But this is what makes successful investing so challenging. What may feel like a good decision in the short term (e.g., selling stocks in your portfolio during a declining market) is often a missed opportunity in hindsight. On the contrary, what may feel like a wrong decision in the short term (e.g., sticking to your plan) is often the best thing in the long run.
We see it time and time again: investors rush toward the exit by selling their stocks at the first sign of volatility. Rather than seeing volatility as something to fear, great investors view it as an opportunity to buy attractive long-term investments at discounted prices. This can be done by deploying excess cash or rebalancing your portfolio – i.e., looking at your asset allocation and trimming positions that have run up and buying ones that have gone down.
During times of market volatility, it is crucial to use the opportunity to assess your portfolio and understand your investments in the context of your overall strategy. If you are considering adjusting your allocation during volatile times, it is important to evaluate whether you are doing so because your long-term plan has changed or simply because of short-term volatility. Remember, 'winging it' is not an investment strategy. However, if you find that every market downswing causes undue stress, it may be time to re-evaluate your risk tolerance. As Marcus says in the article:
The important thing is not to panic and completely abandon your plan.
To learn more about lessons learned from the recent stock market volatility, check out the article here in Bloomberg featuring Marcus Holzberg, CFP®.
If you have questions about investment management and working with a financial advisor, check us out. You can schedule a complimentary, no-obligation call with us here!
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and virtually nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.