People like to think they behave rationally at all times, but the truth is, we all allow emotions to influence our decisions. As it is in life, so it is in investment decisions.
In the last few weeks, the continued spread of the Coronavirus has contributed to global investment market uncertainty. It seems as if every push notification we receive clamors about stock indices sliding or another state declaring the presence of the virus. Newscasters speak in somber tones, and coworkers compulsively refresh their investment dashboards throughout the day. It’s no wonder that investors are feeling skittish.
During times such as these, it is imperative to remember this: market volatility is a normal part of investing. Granted, we do not always hear about it in such a global and omnipresent way, but things like this have happened before, they will happen again, and we will adjust to the changes that these events may bring about.
History of Market Volatility
Since 1950, markets have dropped by 5% or more three times a year on average and by 10% or more once per year. Each time markets have recovered and continued their steady climb towards subsequent record highs. When your investment strategy prioritizes long-term growth rather than short-term gains, patience and tolerance in the face of adversity are key.
Plan for Market Volatility
It can be frightening to see drops in your portfolio value in a short period of time, but keep in mind that you are investing for the long-term. The long-term strategies that we implement for our clients allow for plenty of room for volatility and market fluctuations.
Since we know that these uncomfortable changes are a normal part of the market, we have proactive strategies to minimize any negative effects. We cannot control when events like these happen, but we can control other things. We can monitor and rebalance portfolios to keep them diversified and in line with risk/return targets. We can minimize costs and tax implications. Finally, we can control how we react.
Final Note from the Morris Financial Concepts Team
We will likely continue to hear about COVID-19 in the coming weeks and months, and the fear that it creates will ripple throughout the market. When you hear about stock indices moving in a way that is not beneficial to you or you see the short-term effects on your portfolio, remember that your investment strategy and financial planning are not driven by short-term events.
We plan for events like these, and we are always looking out for you. If you have any questions or concerns about your investments, know that we are always just a call away.
The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. The link to third-party websites included have been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. This material is for informational purposes only and should not be considered investment advice. Nothing contained herein is an offer to buy or sell a particular security or investment strategy. Past performance is not indicative of future results. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees and objectives can be found in our ADV Part 2, which is available upon request. MFC-20-05.