Many novice stock investors started trading actively during the onset of the COVID lockdown, believing that picking winners was relatively easy. But the current downturn in the market has brought them back to Earth again. They have learned that actively buying and selling securities for an extended period of time is quite difficult.
It’s not easy money as they initially thought. Just ask the majority of investors who have endured three consecutive painful quarters.
In a strong bull market, beginners may seem brilliant, but over time, the markets have a way of humiliating new and experienced investors alike.
Professional money managers are backed by research teams and have access to a vast amount of historical data. And it’s their full-time job. Therefore, it may be wise to consider leaving your money management to the professionals. Especially now that people are commuting to work and outdoor life is returning to normal.
With a full-time job and a family, actively managing and trading a portfolio is a daunting task. Many investors turn to professional advisors to help them with their financial planning and investments. Maybe it’s something to keep in mind.
As we enter the final quarter of the year, it’s been an awful time for almost everyone. In the past, the bond portion of a portfolio helped offset hard times with stocks. But that’s not happening this year. With both bonds and stocks depreciating this year, it’s nearly impossible to find shelter during this financial storm.
In the simplest terms, the numbers show that we are in a bear market. Everyone is feeling the pain and it’s easy to visualize the markets tumbling even further.
Bear markets are like real bears because they can cause instant fear. Woodsmen advise not to panic and run away from a bear. As an advisor, I also think that this is sensible advice for investors. No one can predict the future, but historically, the upturns have been sudden and unexpected.
For investors waiting for things to get better, I have a question. When in recent history has the economic environment ever felt calm? Rarely a day goes by without some form of controversy, at home or abroad. Investment momentum can change in the blink of an eye, and often without rhyme or reason.
The bottom line is that investors need to have a long-term view. That means at least 36 months. But I think most should think more like 7 to 10 years. By having a long-term vision, you put yourself in a better mental state to get through tough times. You know, like we have now.
During the height of the pandemic, people had an abundance of time as they worked from home. Many dabbled in individual stocks for the first time, and many became overconfident in their abilities. This year’s market decline has brought them back to reality.
Young or old, novice or experienced, investors need to be mentally prepared for a rough fourth quarter. That said, don’t be surprised if a year-end rally appears out of nowhere. The investment world is simply unpredictable. Ups and downs come and go.
I am convinced that if you keep your wits about you and take a long-term approach, you will be better able to get through difficult times.
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The views expressed in this commentary are those of the author and may not necessarily reflect those of Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations to any individual. We recommend that you consult your financial professional, lawyer or tax advisor regarding your individual situation. Comments on past performance are not intended to be forward-looking and should not be taken as an indication of future performance.