Pradel Financial Group

For Financial Literacy Month, a MARKET VOLATILITY TIP → Keep your emotions in check. Everyone wants to “buy low” and “sell high,” but most investors, caught up in the heat of the moment, end up doing just the opposite.

This image shows the host of emotions investors may feel during a typical market cycle. As stock market prices rise, investors are optimistic. At the top of the market, investors may even feel euphoria, thinking, “This is great. I should invest more.” This is actually the time investors should consider rebalancing.

As stock market prices fall, fear starts to set in. At first, you may think, “It’s ok, I’m a long-term investor.” But as prices drop even further, you may be thinking, “Maybe this time is different.” It’s time to rebalance again.

Staying in balance when the market is down enables you to invest in high-quality stocks when they are “on sale.” As the stock market starts to rebound again, optimism returns.

Rather than reacting to the everyday ups and downs of the stock market, investors might be better served by adhering to the Principles of Prudent Investing:

1) Set clear, realistic, long-term goals
2) Keep investing, regardless of market fluctuations
3) Diversify—don’t put all of your eggs in one basket
4) Select quality investments with professional advice