08/05/2022 10:20
With inflation and the war in Ukraine continuing to worry investors – and Wall Street fresh from thud on Thursday 4 May (-5% on the Nasdaq, worst session since September 2020) – volatility and uncertainty are the two words that characterize markets more than ever. Never as in this moment it seems difficult to make the right investment decisions. In these cases the first thing is to try not to panic and move as much as possible in a rational way, leaving aside emotions.
Jim Cramer, A former hedge fund manager and longtime CNBC Mad Money host, he takes a three-pronged approach for investors to cut the confusion. First, do not attribute any equity movement to the invasion of Russia. “When you see stocks falling a lot and they have nothing to do with the event that is causing the decline – in this case, Russia – there is no point in panicking. If you sell, you are only trading futures, not events… and you will end up losing money, ”explains Cramer, citing semiconductor stocks as an example. Plus, says Cramer, it’s useful be familiar with the companies you invest in. “I bet the sellers of these stocks had no idea what they were; otherwise they would have kept the course ”. Finally, according to the expert, it is good to take advantage of the opportunities that exist: “Remember what matters and what doesn’t”.
Invest without getting caught up in emotion
Other experts suggest that when it comes to making investment decisions in a volatile market, it’s good to keep your emotions out. Sudden dips and sharp rises in the stock market are a normal part of the investment journey, financial advisor said. Mitch Goldberg. In other words, when it comes to the stock market, it’s good to acknowledge your emotions but don’t act on them. This is true whether you want to sell during a big dip or buy during a surge.
It is not the first time
Of course, refraining from taking action may be easier said than done. Experts thus suggest some techniques for managing emotions so that more rational decisions can be made. First of all it is good remember the past. When the stock market goes down, remember this isn’t the first time this has happened. “The stock market has overcome so many obstacles,” Goldberg said, pointing to theSeptember 11, the Great Recession and the 1987 market crash. “What happened every time? The stock market has recovered and has claimed new highs, ”he specifies Brad Klontz, financial psychologist.
Then it is helpful to take deep breaths. It may sound trite, but taking a few deep breaths really works to deal with the onset of panic, Klontz continues. Doing breathing exercises can decrease blood pressure, heart rate, and stress hormone levels, according to wellness expert Deepak Chopra.
Furthermore, consulting a financial expert will also give you something else you need: the tempo. “The goal is to put some time between your urge to act and your behavior,” explained Klontz. “If you can put some time between those two things, you are more likely to be able to calm your emotional brain, engage your rational brain and make a good decision.”
Consult an expert it will also give you the opportunity to reevaluate your investment approach and assess your level of risk by verifying that your portfolio may not be as diversified as it should be.