Choose Discipline, not Fear, as an Investor
Fidelity states that the average largest intra-year drop from peak to trough for the S&P 500 has been about 14% since 1980. Despite these frequent intra-year declines, the S&P 500 has still delivered positive annual returns in most years. For example, from 1980 to 2020, annual returns were positive in 30 out of 40 years, despite average intra-year drops of 13.8*.
Resist the urge to make emotional decisions based on short-term market movements. Attempting to time the market by selling during declines and buying back in later may lead to missed opportunities.
Consider maintaining a well-diversified portfolio across different asset classes to help mitigate the impact of stock market volatility. Think about periodically adjusting your portfolio back to its target allocation, a strategy known as “rebalancing”, which may help manage risk and potentially capitalize on market fluctuations.
You may feel fear but stay disciplined and focused on your long-term financial goals.
Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. Diversification does not eliminate the risk of experiencing investment losses. Rebalancing a portfolio may involve tax consequences and additional transaction costs.
