Five Tips to Overcome Anxiety Over Market Volatility
Written by EFG Hermes
Whether you’re a seasoned investor or just someone who likes to track market activity, you’re probably well versed in the fact that markets occasionally suffer losses — at least when you know your investments are doing well. In uncertain climes, however, you may start getting anxious and question the investment decisions you made. Nobody likes losing money, and seeing your hard-earned funds take a hit would make anyone nervous. However, it is exactly during these rocky times where you should not make rash decisions — take a breath, remember it’s just the nature of equity markets, and overcome anxiety over market volatility with the help of these five simple tips:
- Focus on the long term
Remember that investing is a long-term strategy, and markets favor the long game. Historical data has shown that, with a diversified portfolio, investors are rewarded for holding on to their investments for longer periods of time, as opposed to those who let short-term fluctuations sway their sound investment strategies.
- Don’t try to make sense of short-term movements
If you zoom in on market trends in the span of a week, month or even three months, they will make little sense. Changes may seem sharp and the market will seem unpredictable — a surefire recipe for wrecked nerves. However, if you zoom out and take a broader look, you’ll find that over long periods of time, markets tend to have an upward trend.
- Don’t rely on emotions
When making investment decisions or planning your investment strategy, facts and numbers should be your main driver, rather than emotions. Relying on your feelings could cost you lucrative investment opportunities. Fear and anxiety negatively impact our decision-making abilities, studies have shown, triggering a flight or fight reaction that makes selling seem like the right decision.
- Listen to the experts
In times of uncertainty, put your fears aside and listen to experts. Investment banks such as EFG Hermes employ analysts and brokers whose bread and butter is to read, understand, analyze, and properly react to market behavior. Someone with both an outside and expert perspective is exactly who you need to help you overcome the kind of anxiety that comes with stock market investments.
- Modify your investment behavior
Try to re-frame your perspective on volatility. If markets go down, take advantage of lower prices and increase your investments, don’t pull out based on a bad day, week, or even month. This change in behavior will ultimately shift your perspective on market volatility, seeing it as an opportunity rather than a threat.
In short, as an investor, remember that markets reward patience. There’s a reason stocks have higher rates of returns: they carry a greater risk, which inevitably translates to greater anxiety. However, studies show that over long periods of time, it doesn’t really matter whether you’re heavy on stocks, bonds, T-bills or even gold; what matters is that you hold your ground. Diversify your portfolio, stick to your guns, and you’ll find yourself enjoying the fruits of your patience and sound-minded investment decisions in no time.