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The Cost of Panic During a Crisis | Investment Tips

The Cost of Panic During a Crisis | Investment Tips

March 10, 2022

Stress and Anxiety During Times of Crisis

We can't deny that the Russia / Ukraine crisis is affecting the stock market and gas prices right now. You may be tempted to try to avoid losing your money by "playing it safe" during times like these, but some of the best advice we can offer you is to wait. History has shown repeating patterns of crises over the past 60 years. Even so, the market has remained resilient. History shows that long-term investors who stayed the course through crises, no matter the type, have been rewarded. Investors who remain focused on their financial goals instead of the potential effects of a crisis reap the benefits.

We tend to consume more news during times of crisis, which news stations love and encourage. In addition to this, investors google how the market is performing during a crisis more often. This increase in news consumption and market research tends to make investors more anxious about the economy. As humans, we're more likely to pay attention to negative threatening information when we are anxious.

Investors Shouldn't Cling to Safety Risk

Many investors respond to anxiety by trying to make their portfolios safer. It's never fun to lose money when the market dips. The pain of losing money is psychologically about twice as intense as the pleasure of gaining it. Safer investments may calm investors down for a moment, but it's a mistake to choose safety in the long run. Reactionary investors typically trade long-term results for short-term comfort.

Maintain Perspective

Managing your investments alone during a time of extreme market volatility in crises can be confusing. Many investors try to time market swings and change their portfolios accordingly. Research shows that this strategy doesn't work well. Hopping in and out of investments to capture gains or prevent losses can be a primary reason why investment portfolios underperform. This is why it's important for investors to have the support of a financial professional. Professionals help successful investors control their knee-jerk reactions to market volatility by encouraging disciplined investing and acting as a counter to the market's mind games.

Remember that...

  • Crises influence us to focus on the negative. These negative thoughts are only encouraged by the flood of 24/7 news coverage, so please try to pay attention to the content you are consuming.
  • Anxiety makes us more vulnerable to investment mistakes risking damage to our long-term financial results.
  • You should consider working with a financial professional who can help you reap the rewards of keeping a long-term investment perspective.

Read the full article from Hartford Funds HERE!

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