Investors have seen a rough start to 2022 with markets tumbling. In January the S&P 500 had its worst month since the start of the pandemic, dropping nearly 10% in a few weeks.
While historically high inflation and the threat of pending Federal Reserve interest rate hikes have a lot to do with the market movements we’ve seen, any time our investments lose value is naturally a cause for concern.
If you’re worried about market volatility, you certainly aren’t alone. There are, however, ways to reshape your thoughts around your investments so you don’t spiral every time the market dips.
Remember that market volatility is expected
There’s a reason why putting your money in the market comes with risk: you can lose it just as quickly as you can grow it. This is the reality of investing.
“When seeing multiple weeks of volatility, many investors start to question their strategy and wonder what else they could be doing to protect their portfolio,” says Tony Molina, a CPA and senior product specialist at robo-advisor investment platform Wealthfront. “But it’s important to remember that the ups and downs we’re now seeing is a completely normal part of investing.”
While market dips can be stressful in the moment, these are short-term movements that you really shouldn’t worry about, Molina warns, as they are out of your control.
“These day-to-day fluctuations mean very little to the long-term accumulation of your investments and shouldn’t impact your overall strategy,” he explains.
Investing is a long game
This year so far has been a reminder that the market doesn’t always go up, but it’s in an investor’s best interest to stay the course. Investing is a long game where you most likely benefit from sticking it out over time. In fact, not giving your investments time to grow is one of the biggest investing mistakes financial experts say to avoid. Ideally, you should hold investments for as long as you can to maximize your returns. This is especially true if you’re investing in index funds that track overall markets, like the S&P 500 or the Nasdaq.
“The market has historically trended up over time so you have to think longer term,” Molina says. “Investing is a long game, and no one can time the market, so it’s important to keep your money invested — otherwise you could miss out on future potential gains.”
