Nearly everywhere you turn, you can find someone with a strong opinion about the financial markets. On so many fronts, the news is bad with skyrocketing energy costs and both equity and bond markets down significantly.
Tuning down the noise and focusing on what you can control is key to weathering the current financial storm.
Below are some things to keep in mind if a market tumble makes you feel the need to “do something”. Of course, our team here at Endorphin Wealth are always here to help and discuss current market conditions.
Downturns aren’t rare events
All investors will endure a downturn during their lifetime.
In recent times, there has been a lot of focus on the transition to a bear market.
It is important to keep in context that in spite of several bear markets, the market has also continued to trend higher over the long term. Also, it is important to note not all financial market declines are the same in length or severity.
Dramatic market losses can sting, but it’s important to keep a long-term perspective and stay invested in order to participate in the recoveries that typically follow.
Some bear markets since 1980 have been sharp, but many bull market surges have been even more dramatic. This leaves investors well compensated over the long term for the risk they took on.
For example, the Global Financial Crisis (GFC) of 2008-2009 was an extreme anomaly. However, the GFC also had the longest stock market recovery in history.
Timing the market can be futile
The best and worst trading days often happen close together and occur irrespective of the overall market performance for the year.
Timing the market and predicting which segments would do best is a tough order and can bring a new element of risk.
The Endorphin Team support the idea that broad diversification keeps you from having too much exposure to the worst-performing areas of the market in the event of a downturn.
The best defense: making a plan and sticking to it
It is important to focus on the elements of your investing strategy we can control. Not worrying about those things out of our control, such as downturns in the markets and economy is important. Focusing on the elements in your control can help prepare your portfolio for market shocks.
Bearish market conditions—while inevitable—don’t last forever.
As a savvy investor, you can ignore short-term pullbacks of the market (and any commentary that might cause you to veer off course) and remain committed to achieving your long-term vision.
Downturns come and go. The results of a well-designed and faithfully followed plan, can serve you great outcomes for many years to come.