The coronavirus has caused uncertainty in the financial markets and raised fears that we are headed for a recession. What’s an investor to do?
Investment experts generally agree on two key principles during periods of market volatility: stay invested and continue to build your portfolio.
Stay invested
Investors who have seen their portfolio drop in value may be tempted to sell certain holdings for fear it will keep dropping. But as a general principle of investing, experts advise to be patient. Selling at a loss locks in the loss; waiting for the market to recover may give your investments time to regain their original value.
Build your portfolio
When markets are down, you may get the urge to put your regular investment plan on hold and park new investment dollars in low-interest money markets. It’s generally considered a safe choice, but it’s also a missed buying opportunity. Sitting on the sidelines in cash means you could miss out on the recovery. Not only that, but when you do buy back in, you would be investing when prices have already gone up.
Broadly based market declines tend to bring down the prices of all stocks, including stocks with strong fundamentals. Purchasing quality companies at value prices—buying low—can lead to profit when the market recovers.
Do what’s right for you
If you’re worried about market volatility, be sure to talk to your advisor. Each investor is unique, and your investment objective or risk tolerance may have changed. Either way, your advisor can help you understand the factors behind the current situation, assess the outlook for the future and help you make decisions that are best for you.
This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or an offer or a solicitation to buy or sell securities. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.
Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI has taken reasonable steps to ensure their accuracy.
The opinions expressed in this communication are solely those of the author and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.
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