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The coronavirus outbreak rattled the stock market for months, and it continues to show signs of uncertainty. It bounced back earlier this week, which is an indication that it has recovered somewhat. But later this week, we had the biggest single-day drop since the coronavirus drama started.
On February 12, the Dow was at 29,500. But on March 23, it went down to 18,200. Now, the Dow is at 25,303. But it’s still going to be volatile as we get through the rest of this ordeal. The market fell 35% in approximately 35 days, which is unprecedented! This is the deepest recession we’ve ever had, but it has also been the shortest. So hopefully, we’ll be out of it sooner than expected.
Market timing is not a coherent investment strategy, so you never want to make a decision based on emotion. There’s no such thing as a “crystal ball,” just as there’s no such thing as “timing the market.” Things are so volatile right now that no one can predict the market. And no matter how much you may want to act on fear, you don’t want to jump in and out of the market just because things get a little rocky. This kind of strategy won’t work out over the long-term.
The most important thing you can do is invest, but you need to have a plan. Make appropriate allocations (such as equities, stocks, and bonds) based on your risk tolerance, and be sure to think about it long-term. You might have gotten out of the market, but you’ll have to get back in at some point. You don’t want to forget about “dollar cost averaging,” especially if you have a large amount of money sitting in the bank. Put a certain amount in the market every month, because your money needs to be invested if you want to see any growth. You never want to sit on your cash, especially at today’s interest rates!
Having emotional competence is important, especially during times like these. Staying disciplined when the market is volatile is the most important factor to your success. Investors see market volatility as an opportunity to make more money over the long term. So, it’s always better to be optimistic, even when things look bad.
It’s an election year, so no one knows what’s going to happen. There will always be reasons not to invest, but no one ever got wealthy by betting against America. Ignore the noise, and stay focused on your long-term financial goals my friends!
For more advice on how you can survive this current financial climate, be sure to reach out to Trevor Shakiba at Shakiba Capital.
Identifying commercial real estate syndications is a more involved investment strategy which usually only available to accredited investors. It can be much harder to find sponsors than it is with other passive investment opportunities.
2020 isn’t over, so you want to make sure you’re prepared for the rest of the year. Let’s a look at what happened to your portfolio, and ask yourself if you’re diversified enough.