Investing

The single smartest thing to do with your investments when the stock market slumps

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No matter what’s happening in the markets, experts are clear that the best thing you can do with your investments right now is simple: nothing.

The stock market began to fall in late February as a result of the spreading of the novel coronavirus, and has largely kept on a downward trend since. As it started, investors rushed Robinhood, Vanguard, and Fidelity, even causing outages on online platforms due to high trading volumes.

However, experts say cashing out isn’t the answer, and could mean selling at a loss. Being hands-off with your long-term investments is the best move you can make in a market downturn.

If your financial plans haven’t changed, your investment strategy shouldn’t either

Financial adviser Jeff Rose tells clients that goals, not market performance, should be driving investment choices. Unless you’re in the unlikely situation where market changes have influenced your plans, he suggests letting investments stay put.

“Chances are, absolutely nothing has changed in terms of your financial goals over the last week, the last month, or the last year. So, why should a market drop change the way you invest?” Rose wrote for Business Insider. “The answer: It shouldn’t.”

Leaving your investments alone today could be better for your long-term goals, especially for anyone with many years of investing ahead.

Doing nothing doesn’t feel comfortable, but experts say it’s the right move

Financial planner Taylor Schulte says that leaving investments alone in a period of bad performance is hard because it goes against what we’re taught, even though it is the right move.

“If we want to get better grades, we study more. If we want to get in better shape, we spend more time in the gym and make active changes to our diet,” Schulte previously told Business Insider contributor Holly Johnson. “When we want to improve something in our lives, it feels natural to make a change and take action.”

That approach, however, doesn’t work well with investing. Being hands-off is better here, and will allow stocks to rebound with time. Keeping your mind off of the market can keep your hands off your investments – writer Becky Kleanthous even went as far as to delete her investing app from her phone.

If anything, now is the time to keep buying

If you’re the kind of person who has to take some action, now could be a smart time to buy if you’re able. For most investors, experts generally recommend choosing investments that are diversified by nature such as index funds or mutual funds, which can be less risky than choosing individual company stocks.

Lauren Anastasio, a financial planner at SoFi, says that if anything, a market downturn is an opportunity to build wealth, especially for younger investors who have years to let their investments rebound.

“Whether there’s a day where markets are down or we’re going through some type of bigger market downturn, that really just means everything is on sale,” Anastasio previously told Business Insider’s Tanza Loudenback. “You’re getting those same securities and the same number of shares at a cheaper price, and you’re going to continue to own those shares as they increase in value over time.”

For anyone who wants to make a move with their investments, buying is the only action to take. Waiting out the storm and making the markets work in your advantage by buying are the best strategies to come out of the downturn for the better.

[“source=businessinsider”]

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Loknath Das

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