Keeping Cool: Investment Strategy vs. Reaction

Investment Strategy vs. Reaction

After losing ground in 2018, U.S. stocks had a banner year in 2019, with the S&P 500 gaining almost 29% — the highest annual increase since 2013.

It’s too early to know how 2020 will turn out, but you can count on market swings to challenge your patience as an investor.

This week, Craig Siminski, of CMS Retirement Income Planning,  shares an article offering ideas to help investors focus on strategic decisions, rather than reacting emotionally to the latest market news or movements:

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The trend was steadily upward last year, but there were downturns along the way, including a single-day drop of almost 3% on August 14. That plunge began with bad economic news from Germany and China that triggered a flight to the relative safety of U.S. Treasury securities, driving the yield on the 10-year Treasury note below the 2-year note for the first time since 2007.

A yield curve inversion has been a reliable predictor of past recessions and spooked the stock market. By the following day, however, the market was back on the rise.

It’s possible that a yield curve inversion may no longer be a precursor to a recession. Still, larger concerns about the economy are ongoing, and this incident illustrates the pitfalls of overreacting to economic news. If you were also spooked on August 14, 2019, and sold some or all of your stock positions, you might have missed out on more than 13% equity market growth over the rest of the year.

Tune Out the Noise

The media generates news 24 hours a day, seven days a week, and presents it through television, radio, print, and the Internet. You can check the market and access the news at work, in your car, and anywhere you carry a mobile device.

This barrage of information might make you feel that you should buy or sell investments in response to the latest news, whether it’s a market drop or an unexpected geopolitical event. This is a natural response, but it’s not wise to react emotionally to market swings or…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 21 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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