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If you are experiencing stock market panic, our latest blog explains why it might pay to keep calm and carry on.
If you are an investor in the stock market, you’ve probably seen that your investment portfolio has taken a hit recently.
Rising prices, climbing interest rates and fears over the bubbling Russia-Ukraine conflict have spooked investors, which is why shares have been jumping lately.
Stock market panic – fight or flight?
Those of you who have been investing for some time will have probably grown accustomed to market downturns and so-called “corrections”, and realise it is a necessary evil.
For those of you who are newer to investing, seeing such erratic moves in your investments can be unnerving.
However, in this article I am going to show why you shouldn’t panic about skittish share prices and why it pays to keep calm and carry on.
It’s important to first understand the realities of the global stock market in order to set healthy expectations for your investment portfolio.
The reality with the stock market is that it is consistently moving in ebbs and flows throughout the days, months, years, and decades.
It can be sensitive to world events, such as Brexit and the Covid-19 pandemic, which can affect how shares prices act.
These world events also tend to affect different stock markets in different ways. For example, Brexit had a much greater negative impact on the UK stock market than, say, the US market.
Put simply, there will be times when you are doing well – i.e. having a stock portfolio full of positive returns – and times when you are not doing so well.
But as an investor, you have no choice but to take the good with the bad.
The good news is the data shows us that when you zoom out and look at stock market performance over the long-term, the chances of you making a profit are very good.
However, it is always important to keep in the forefront of your investing mind that past performance is not indicative of future returns.
It’s also important that you don’t panic and run a mile at the first sign of trouble.
Keeping cool and calm when the stock market becomes volatile is the one of the best traits you can have as an investor.
When we act on emotion, such as fear or greed, things rarely work out well.
Trying to time the market by “buying the dip” or selling out as soon as things get hairy is a sure-fire way of losing money.
As Warren Buffet, perhaps the world’s best-known investor, once said: “The stock market is a device transferring money from the impatient to the patient.”
Succeeding at investing means being patient and sticking with your investment strategy. Chopping and changing your plan every two minutes and trying to second-guess which direction share prices will move is rarely a good strategy.
In fact, it will only tire you out, complicate your investing journey and most likely lead to worse investment returns.
Therefore, from one long-term investor to another, the best thing we can do right now is to keep calm and carry on.
Diandra Latibeaudiere-Gardner 'Finance Dee' is a 28-year old British-Jamaican living in the SE of England. By day she's a research consultant and by night a finance YouTuber and FIRE blogger