While still suffering from a global pandemic, the world is prepared to undergo a geopolitical paradigm shift. Traditional markets are becoming restless, while new ones already appear to be in freefall. As they say, these are intriguing times for investments.
What impact will this have on my 401(k)? I don’t want to go hungry in retirement, which may seem like a trite or dumb answer, but if you’re a small-time, everyday investor like I am, fear is a genuine response. I thus searched online for tips on how to overcome the white-knuckle fear of investing during exciting times and came back with the following to share with you:
Panic away, but don’t take any action as a result
Always being told to “don’t panic” is ineffective and frequently patronizing counsel. So feel free to panic. Express your emotions. It’s a terrifying, unnerving period, so trying to control your feelings is neither natural nor beneficial.
Don’t “panic about panicking,” however, advises Dr. Brad Klontz, associate professor of practice in financial psychology and behavioral finance at Creighton University’s Heider College of Business. Other than treating yourself to a few scoops of ice cream, don’t base your financial decisions on your emotions.
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Think about the wider, longer view
When you invest “right,” you maintain an eye on the long term. It’s challenging to adopt a wider perspective when there are many fast-changing situations that pose a threat of spinning out of control, but these are precisely the circumstances where doing so is most crucial.
Keep in mind that incidents like these have occurred before. And this time won’t be the last. But the market has always recovered from downturns through wars, depressions, recessions, and social upheaval. Since 1926, the return on stocks has been about 11% annually. A 15-year stretch without a stock loss has never occurred.
The peak before every crash was one of the four very worst days to invest in stocks over the past 50 years, but you would still have made money. As long as you remained calm and didn’t sell out in a frenzy.
The time is not now to review the performance of your 401(k). It is going well. It is not the time to do a doomsday scroll or fixate on news sources. You can choose to disregard everything.
“Avoid watching the markets day in and day out, as this will only increase your anxiety to no useful end,” said Greg Davies, head of behavioral finance at Oxford Risk. There will unavoidably be big movements that are completely unanticipated. You should try not to worry about them and keep them out of your long-term decisions because you can’t control or forecast them.
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Make future changes a priority
If you find yourself worrying excessively about your money, follow this MarketWatch tip: Write down how much you “lose” each day (what you define as “losing” will depend on your definition; more on that below) and consider whether your current approach is too hazardous for your long-term objectives or emotional well-being. You’ll have something useful to accomplish and knowledge for the future as a result.
Bring your loss notes and discuss if you should alter your degree of risk before the inevitable next downturn with an advisor at your investing firm once the markets have stabilized.
Avoid lamenting “paper losses.”
What exactly is money, man? The stocks, bonds, and other financial instruments represented by those dollar signs in your retirement assets are things you already own, so the only time you actually make or lose money is when you sell or purchase anything.
The worth at the time of any future withdrawal, not the assets’ reduced prices, is what matters, according to Davies. “Sitting tight and waiting is much preferable to selling when the markets are down.”
Avoid attempting to “buy the dip” while continuing to invest
The concept of “buying the dip” holds that following a drop, you should buy stocks because they are practically “on sale.” Although it seems to make perfect sense, this tactic is ineffective.
“Buy the dip is one of those things that works really well on paper, but it doesn’t work well in real life,” says Callie Cox, a senior financial strategist with Ally Invest. The two issues with dip purchasing are as follows: First off, trying to schedule your investments in this manner results in having insufficient funds available to trade during “non-dip” periods.
Second, you can end up catching a falling knife because you have no idea how low things will go. Instead, make regular investments with a focus on long-term benefits. As they say, remain composed and move forward.
Consult one or more professionals
You should seek assistance from a mental health professional for the “anxiety” component and a financial advisor for the “financial” part if you need assistance with anxiety brought on by financial instability (or the fear of it). Since these are trying times, we might all use a little consolation.