Stay focused, calm as equity markets decline

“Long-term investment success depends almost entirely on how one handles stock market declines emotionally, as opposed to how one’s portfolio handles them.”

One of my favorite financial authors, Nick Murray, coined this phrase a long time ago. Go back and read it again. It’s a succinct and meaningful quote that investors should stick to their monitors as a reminder when they view their account statements.

Investors should focus on the things they can control, namely their own actions, during times of stock market volatility.

A version of this article is being written in one form or another all over the country and the world. With the third quarter over and investors beginning to receive statements pointing to continued declines, many will be faced with the choices outlined above.

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Unfortunately, too many people will let their emotions run wild and forget that it is more often our own actions in response to market declines that can potentially harm our long-term results. Investment portfolios, especially those that are well diversified, are designed to be more resilient.

We’ve seen tough market environments before and we’ll likely see them again when this current period is behind us.

This can come across as yet another “do nothing” or “stay on track” message. In some ways it is. We often believe that choosing not to do something is the wisest course of action.

I suggest looking at this time as an opportunity to act rationally rather than emotionally. Prudent investors will reassess their cost of living and spending choices when markets are affected.

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Can you postpone or postpone the withdrawal of your investments for a certain period of time? Do you have the option to use cash from a bank account instead of portfolio assets? Should You Rethink Your Social Security or Retirement Strategy? Is Now a Good Time to Consider Roth IRA Conversion Options?

All of these questions focus on proactive steps you can take in challenging times. Note that none of the above items mentioned anything about panic selling stocks or bonds.

The biggest difference between people who get through these tough times and those who aren’t revolves around planning.

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Those who have a plan or a trusted financial advisor they can consult can avoid a big mistake. It’s easy to get caught up in the whirlwind of the daily market swings we’ve been experiencing lately, but don’t lose sight of the bigger picture.

The economy may be off-putting for a while, but better times are coming. It is probably our own choices, even more than our portfolios, that can determine how we do until then.

This is for informational purposes only and should not be construed as personal investment advice. Consult your financial professional about your unique situation.

Chris Ruedi is a financial advisor at Savant Wealth Management, Bloomington.


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