The stock market is a no-called-strike game. You don’t have to swing at everything—you can wait for your pitch.
Waiting can be the last thing you want to do when the stock market throws you a curveball.
When that curveball is a correction, most people want to swing and sell so they don’t strike out and lose. That instinct can be a trap.
It leads to impulsive moves. It’s why investors get rid of winners too early and hold on to losers for too long. And it’s why most individual investors underperform. Which is why most people shouldn’t trust their instincts in market corrections…
Sideline that instinct and keep a level head by knowing the facts about corrections.
This month’s From Inside The Studio Newsletter highlights 7 key facts that will help you stay on base during the next correction.
The truth is no one can predict market corrections. There’s no way of knowing how far markets may fall or when the recovery will come until after the moment has passed.
Here’s what we do know, though.
Market corrections happen around 1 time a year, almost every year. We know that fear can make us act against our own interests—and that greed, fear, and uncertainty can prime us for big mistakes when we sense loss on the horizon. It’s one of the reasons why we strongly believe in creating a financial plan that uses various types of investment buckets that can help provide you with the foundational safety needed to not rely on market temperament, while using market investments as well that are built to endure the storms over the long run.
We also know that overreacting and pulling back too quickly can mean potentially missing out on the good days ahead. I saw a study on the S&P 500 from Dec. 2005 thru Dec. 2020. If you invested $10,000 in Dec. 2005 and stay invested that whole time, you would have $41,100 be Dec. 2020.
But, if you tried to time the market and get out when the news wasn’t so good and missed the best 40 days of the market, you would have actually lost money and only have $5,205 left. What a difference!!!
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