For most people, investing is a long-term game. You’re not looking for a quick score to get an influx of cash you can spend on a new Sea-Doo. Instead, you’re trying to slowly but surely build wealth so you can fund your retirement, pay for your kids’ college educations, 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 in general, it can be difficult for investors to remember to think about the long game. Financial services firm Charles Schwab, however, has a few things to keep in mind as you move forward with your long-term investment plans.
For more help managing your portfolio during a tough economic time, consider working with a financial advisor.
Tip 1: Bear Market is not forever
For the first time in years, there is a bear market in the United States. A bear market is one where prices generally sell off, encouraging people to sell. This can be discouraging for wait-and-hold investors, who will see the value of their portfolio fall.
Schwab stresses, however, that long-term investors should remember that bear markets don’t last forever. A review of the S&P 500 since 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 large bull market.
In short — don’t be discouraged. This won’t last forever.
Tip Two: Resist the urge to sell
If you wake up every day and see the value of your portfolio, it can be very tempting to cut your losses and exit the market entirely, re-entering at a later date. However, unless your financial situation really demands it, the best move is to keep it out. As mentioned above, eventually the market will recover, and you don’t want to miss the early days of growth, which tend to be the biggest jumps, according to Schwab.
A diversified portfolio can ease a recession, so be careful when building your financial plan that you don’t put all your eggs in one basket.
Tip Three: Market timing is for fools
Market timing is a strategy where you buy and sell stocks to take advantage of a specific jump in value that you expect to happen quickly. Schwab is very clear about the idea:
“It’s almost impossible. Time in the market is what matters. While staying the course and continuing to invest even when the markets sink into difficult 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 screw up a market timing game, so it’s not worth trying as an amateur.
The bottom line
Things are a little scary right now for investors as we are in a bear market with an uncertain economy. There are three things you can do, however, to succeed: remember that 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 difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who 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, such as a 401(k), make sure you use it.
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