Whether we like it or not, money is emotional. We know that we need to separate emotion from our money, but it can be easier said than done. This is especially the case when it comes to investing in the stock market.
Our emotions can motivate us to make rash decisions when we see our brokerage and 401(k) accounts lose value. We begin to believe what our emotions are telling us and want to act. Whether you realize it or not, this emotion finds an enabler in one thing – headlines.
Is The Sky Really Falling?
The stock market has seen massive growth since The Great Recession in 2008. The S&P 500 has returned north of 140 percent since then. If you’ve been investing over this time you likely have benefitted greatly.
However, as we all know, what goes up in the market must come down at some point. This has led to recent headlines promising us there will be a major decline in the stock market. Some headlines warn of a 40 percent decline. Others claim that because retail investors are “all in,” we’re going to see a correction.
Headlines can entice; that’s their job. But at the end of the day, they’re only speculation. Simply put, the media is doing its job – to get ratings. While it may seem like the sky really is falling, or is about to fall, what we need to remember during these times is the importance of an investment plan. This investment plan is what’s meant to help guide your investments and help reach your goals.
Since no one knows if and when the stock market will decline, the best thing to do is to ignore the headlines – as difficult as that can be at times.
Where Do You Want to Be 30 Years From Now?
It can be fun to speculate as to what may happen with stocks. However, this leads to emotion-fueled, short-term thinking. Instead of looking to headlines for advice, use them to ask yourself where you want to be 20, 30 or 40 years from now.
Paint yourself a mental picture of what your investing is meant to accomplish or even have a physical picture of it and let that guide you through the white noise promising doom and gloom. This can be as simple as a picture of your child if you’re saving for their college expenses or a picture of a particular retirement location you have in mind. It’s this visual reminder that can put meat on the bones of your investment plan.
Whatever drives you, put it in front of you to help you to continue to invest wisely.
Don’t Overlook Opportunity
A common thing that gets overlooked in the headlines is that there is still opportunity for those who have a long-term mindset when it comes to investing.
What if you don’t have the stomach to buy stocks at the moment? You still have the opportunity to do something like rebalance your portfolio if you’ve not done so recently. Not only will this ensure your investments are in line with your risk tolerance but it will also help make sure you’re still within your chosen asset allocation.
It can be tempting to give into the fear that headlines stoke. We see our investment accounts fluctuate and feel compelled to act. However, those who pursue a long-term mindset are rewarded over the course of their investing life. The headlines might be fun to read, but take them with a grain of salt.
By John Schmoll, Staff Writer