Surprisingly, stocks have had the worst start to the year EVER. Unfortunately, that makes people scared. This article cites Google Trends statistics that the phrase "sell stocks" is the most popular internet search since 2008 (the year of our most recent financial crisis).
While we can give people a pass and say it is "human nature" to be scared and want to sell during a massive sell off, what's going on in the markets right now is most likely NOT a repeat of the 2008 financial crisis and Great Recession- despite what the talking heads in the media are saying.
Facts are that while China is causing a lot of white noise and the price of oil is highly volatile, the global economy is still growing, the US banks and individuals are carrying a lot less debt, and people do tend to have more cash slush funds to tap into.
History tells us that the market rewards optimists and pragmatists.
Intelligent and long term investors typically take these 3 steps during volatile times:
- Do NOT panic - one can argue that investing is equally about psychology and numbers. Selling out of fear is probably a mistake. Keeping the course with high quality investments that you know, understand, and feel confident in will help you hold through peaks and valleys. Ultimately, you have to be able to sleep at night. No matter how well something is working for you, if you can't sleep at night, it's not worth owning.
- Diversify - do not put all your eggs in one basket. Investing in various industries and types of assets (bonds, mutual funds, stocks, REITS, etc.) can help guard against experiencing the large market swings, ideally lose less money, and potentially capture a good portion of the upside.
- Talk with your advisor - when times are challenging do not hesitate to talk with your advisor. That is why you pay them. Inherently, advisors are not YOU so they can provide perspective that you cannot give yourself-especially in emotional or stressful times. While the media has touted fear and anxiety your advisor may feel differently about the market outlook. Experienced investors know that advisors hold the responsibility to talk through your questions, deliver solutions, and help their client maintain a peace of mind about their long term plan. If your advisor has not reached out to you, contact them, and review your portfolio. It's likely you will find things are a bit better off than you thought.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).