Manage Your Emotions During Volatile Times

The history of the stock market has always had a consistent message; volatility is a normal part of investing.  Another consistent message is that the U.S. stock market has been resilient throughout its history, and has weathered the storm during periods of crisis, only to recover and move higher over longer periods of time. While the severity of the impact COVID-19 will have on the global economy is still highly unknown, we recommend keeping your emotions in check during these volatile times. As financial advisors, we often hear phrases such as “I am going to get out of the market now and will get back in when things are good again.” Translated, this basically means, “I am going to sell low, let the market recover, miss the gains, and then I am going to buy high.” For those of us who have been through the tech crash in the early 2000’s and the financial crisis during 2007-2008, we have seen what the impact of maintaining a strategic asset allocation policy can have during market recoveries.

The chart below, produced by BlackRock, is a good piece to review when fear and emotion come into play. Investors tend to ride markets up and then debate selling when markets go down.

 

Ups and downs of the market chart

Average Timing Chart

As you can see on these charts, periods that followed investors cashing out (based on the S&P 500 Index) have experienced above-average returns (14.1% one year later), while periods where cash flowed in have experienced below-average returns (6.1% one year later).  People know the concept of buying low and selling high but still tend to let emotion take over and do the exact opposite; buy high and sell low. During volatile times, we continue to recommend:

  • Sticking to your strategic asset allocation policy and not selling into panic. Reach out to your Advisor to discuss your questions and concerns.  
  • Reviewing your risk tolerance, but also not selling based on short-term performance of the market.  
  • Long-term investing is exactly that; long term. Build your portfolio based on your risk tolerance and reduce your risk level over time.

Please visit our Coronavirus Resource Center for related content.

Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.

 

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Coronavirus, Tax BY Jacob Clark
Ohio Unemployment Benefits for Self-Employed and 1099-Misc Filers
FASB Delays Leasing and Revenue Recognition for Certain Organizations in Response to COVID-19
Individual Tax Planning Under COVID-19
Documenting Paycheck Protection Program Requirements of “Need and Liquidity”
Ohio Programs Update May 20, 2020
Cash Flow and Liquidity Planning Opportunities

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102