A question we are often asked from investors is, if I moved my stock portfolio to cash when my investments dropped, how do I know when it’s time to get back into the market?
This is a great question. First, examine why you sold these investments. See if you can recognize the emotions that drove you to that decision. For example, fear is a common driver to hitting the sell button. However, selling is rarely the right decision, since historically the markets have always recovered given enough time. The day-to-day movement in the market is a normal part of the investing experience. We can’t experience the ups without the downs. It is important to have realistic expectations when investing in the stock market. Corrections between 10% and 20% are normal and happen on average once a year. These pullbacks can be an opportunity to invest more.
With this awareness about the stock market, it is important to apply this knowledge to future decisions when emotions arise during volatile markets. Leaving the past behind and making intentional decisions moving forward can help you become a more confident investor.
After you create clear goals and an understanding of your time horizon for needing the money, it may be time to re-enter the market. Additionally, you may want to consider your risk tolerance and start more conservatively if you are feeling apprehensive. A balanced portfolio designed to minimize risk can still help you work towards your financial goals.
We encourage you to stay committed to your long-term financial plan and have faith that this too shall pass.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
All performance referenced is historical and is no guarantee of future results. Investing involves risk including loss of principal. No strategy can ensure success or protect against loss.
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