Investing in stocks can be like riding a roller-coaster.
You know the roller-coaster will go up and then you know it will go down.
But you don’t know what will happen after the first hill…….until you experience the ride. You have to endure the entire ride.
The roller-coaster experience is similar to the volatility investors are now experiencing in worldwide stock markets.
Volatility means how much something goes up or down.
In stock market terms, the more volatile a stock or asset class is, the more the increases or decreases are, as compared to other stocks.
You will note that increases are part of the definition of volatility. But for most investors, they can easily handle the “volatility” of increasing stock prices.
It is the decreases (losses), such as have occurred recently, which cause most investors concern. Most investors dislike volatility when it is associated with down stock markets.
The 2018 decline should be considered normal, on a historical basis, even if it has not been enjoyable to experience.
You want to know why these losses are occurring and when they will come to an end.
We do not have good answers to these questions. No one really does. Sometimes markets react to all kinds of news, information and investor psychology.
Today’s message is that during times like these, investors need to be disciplined.This is when investors need to remember that losses are temporary, unless you sell your stocks in a panic.
It is nearly impossible to consistently time the markets, as it is quite difficult to predict both the decline in advance and call the bottom of a downturn. Thus, remaining disciplined and adhering to your personal Investment Policy Statement will likely prove to be a solid strategy over the long term.
Investors who have an allocation to fixed income should be re-assured, as that should provide you with cash and liquidity for your near-term spending needs.
This is when you need to remember that your stocks are long term investments…..and over the long-term, which is many years, you should expect positive returns from your stock investments.
We don’t know how long the down portion of this roller-coaster ride will be.
Buckle up. We are here for you for the duration of the ride….
If you have questions, you want to discuss the markets or the impact on your personal situation, please contact us. This is why we are here.