Updated: Mar 1, 2021
The stock market is constantly moving up or down, but what do you do when it goes WAY up or really far down? Read on for some Do’s and Don’ts courtesy of Coast to Coast Finance.
Talk to your CFP
Talking to someone whose job it is to keep your investments safe will be your greatest resource in any market. A Certified Financial Planner can provide valuable insights as to how your portfolio is performing at any time. If you don’t have a CFP, reach out to firstname.lastname@example.org and we can help you get in touch with one for free.
Try to understand why
It’s been said that knowledge is power, and in the investment world this is especially true. If you can understand why the markets are moving in a certain direction it will give you the ability to make informed decisions, and you will begin to expect certain market movements (up or down).
Stick to your strategy
If you don’t have an investment strategy you might want to consider making one. If you do have an investment strategy, hopefully you planned your strategy around potential volatility in the market. And, if you planned your strategy around potential volatility, you were prepared for this, and you should stick to your plan.
Stay calm and follow Coast to Coast Finance
Volatility is to be expected. If watching stock prices rise or fall rapidly is stressing you out…don’t look at the prices so often! Try not to check your stocks or investments every 15 minutes or every hour like you might check your favorite social media feed. Unless you are a day trader making their living off of minute-by-minute market movements you don’t need to check your stocks every hour or even every day. Follow Coast to Coast Finance on Instagram instead @ctocfinance, or check out our Facebook and Twitter!
Do not Overreact
Just because the stock market is falling does not mean you should throw in the towel and pull all your money out. Overreacting could actually increase overall market volatility, and it will probably not help you achieve your financial goals. Instead, talk to your CFP and figure out what your best course of action is. Take a look at this chart illustrating the “COVID-Crash” of March, 2020 and notice how the market recovered in the months after the crash.
VTI chart courtesy of finance.yahoo.com © 2021 Verizon Media. In partnership with ChartIQ
Do not “Panic Sell”
Did you see all those tall red bars at the bottom of the chart, just before and during the crash? That's textbook panic selling. We understand seeing prices fall can be scary. Most people do not buy stocks and intend to sell them later for a loss. But, if you panic and sell just because a stock is not performing as you expected, sometimes it can end up setting you back even more. Still, there is a time to know when to cut your losses and get out. Even so, if you take your time and stick to your investing strategy, you may find great buying opportunities in a market that is declining.
Do not give in to “FOMO”
It is the complete opposite of panic selling. FOMO (Fear Of Missing Out) can cause panic buying. Maybe you see everyone else buying a certain stock and making money, so you think you should, too. No. Unless it fits your investment strategy, it is not advisable to chase after whatever stock is making headlines that day. In many cases, the opportunity for extraordinary gains will already be gone by the time you’re reading about it on social media, and you might find yourself holding the bag instead.
Do not make uneducated decisions
It sounds pretty simple, right? Don’t make important decisions with your money if you have no idea what you are doing. In many cases, if you know what NOT to do, you can just do the opposite thing and be okay. Should you make uneducated or uninformed decisions? Should you take advice from unprofessional strangers? Should you just buy stocks at random with no idea how the company is doing because everyone else is doing it? If you answered yes to any of those questions, you may want to re-read this article.
So, what have we learned?
Do talk to your Certified Financial Planner before making important financial decisions. Do educate yourself on what’s going on in the markets as it relates to your investments. Do have an investment strategy and stick to it!
Don’t panic, and don’t overreact. Don’t chase after the latest trends, and don’t try to time the market.
And one last thing…DO come back to Coast to Coast Finance for more articles like this, and do join the conversation on our Forum. 😊