Stock markets have been on a wild ride this year and it is likely that the volatility will continue through the remainder of the year because of the degree of uncertainty around the world. Current events with indeterminate outcomes almost always trigger emotional responses on the part of investors, thereby affecting capital market movements.
When there are large swings in market activity it is often just an overreaction to uncertainty; there may be no fundamental reason for investor worry. A good example of this is when the media aired the news that Britain voted to exit the European Union. Overall the U.S. capital markets suffered for the first two days following the BREXIT vote; suddenly, when investors realized the sky wasn’t falling, the markets quickly recovered.
If markets continue to gyrate don’t be surprised and definitely don’t panic. Panicking (or selling) does not serve you or your portfolio results over the long term. Market fluctuations–even wide, uncomfortable swings–are a normal part of investing that we investors have to accept in order to reach long-term goals.
For instance, a client contacted us the morning after the BREXIT vote and asked, “Does it make sense to move money from my investments into cash?” Because her goals are long-term and there is no way to anticipate the market’s next move, our response was, “No. Making a move would not help your portfolio results.”
In our experience, successful investors look beyond short-term capital market movements and stay focused on their investment plans. This picture says it all:
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