Economic downturns and turbulent investment markets can make people nervous. Recognize these events as a normal, although undesirable, part of the economic and investment cycles. With that in mind, the following are some tips for investors during unpredictable times.

Tip 1: Don’t panic.

Some people may be tempted to bail out of their stock investments if markets are having a particularly rough ride. Selling solely because the stock market tumbles may be the worst thing to do.

Tip 2: Stay invested.

The chart below shows that pulling money out of the market — even for just a few weeks — could really cost you in potential investment gains. If missing the 10 best days sounds implausible to you consider that in the past 20 years, seven of those best days happened within just about two weeks of the 10 worst days.

If the stock market posted gains and losses every other year, imagine what you would lose by selling after a dip. Where would you put your money? A money market account might earn a steady 1.3%, but, that won’t even keep up with the average long-term inflation rate of 3.30%.

Tip 3: Keep a long-term perspective.

It’s easiest to stay the course if you focus on your major life goals and not on the market’s day-to-day or month-to-month movements. Look at your quarterly account statements, stay on top of major current financial events, and plan to do a thorough review of your investments — asset allocation, investment performance and progress towards your goals — once a year.

Tip 4: Dollar cost average.

One of the most effective approaches to investing is dollar cost averaging. You simply commit to investing the same dollar amount on a regular basis. When the price of shares in a stock or investment portfolio rises, you’ll buy fewer shares, and when the price dips, you’ll buy more.¹

Tip 5: Maintain a diversified portfolio.

Diversification lowers your risk because historically not all parts of the market move in the same direction at the same time. Losses in one area may be balanced out by gains elsewhere.²

Tip 6: Know your risk tolerance.

If you find stock investments to be too risky for your taste — for example, if you can’t sleep at night because you’re worrying about your stocks, — maybe you should consider a safer, steadier ride.

Big Picture Perspective

January 1, 2004 – Dec. 31, 2023

• S&P 500 delivered an average annual return of 11.17%.
• Bonds (Bloomberg Barclays US Aggregate Bond Index) delivered an average annual return of 3.29%.
• Stable assets (90 day T-bills) delivered an average annual return of 1.48%.
• Inflation (comprised from the U.S. Labor Department) has averaged 3.30% a year.

Source: Kmotion Research, Callan Institute, https://www.callan.com/periodic-table.

Tip 7: Make thoughtful moves.

If you make changes to your investments, do so in a thoughtful way, and after careful consideration. Talking with a financial professional could be a good first move.

If you’re thinking about making a change to your investments, consider talking with a financial professional. We are here to give you the perspective and guidance you need to help you survive market down times.