Sage advice from a third party Rapid-fire news reports about higher energy and food prices or talk of a potential world war or nuclear attack are unnerving. But making financial decisions based on an emotional response to current events is often a losing proposition.
“Making a radical change in the midst of all this uncertainty is usually a decision that [you’ll] regret,” said Don Bennyhoff, chief investment officer for Liberty Wealth Advisors and a former investment strategist at Vanguard.
Look back at periods of crisis over the last century and you’ll see that stocks typically came back faster than anyone might have expected in the moment, and did well on average over time.
For example, since the financial crisis hit in 2008, the S&P 500 has returned 11% a year on average through 2021, according to data analyzed by First Trust Advisors. The worst year in that period was 2008, when stocks fell 38%. But in most of the years that followed, the index posted a gain. And four of its annual gains ranged between 23% and 30%.
Whatever the news today, building financial security over time requires a cool, steady hand.
“Don’t let your feelings about the economy or the markets sabotage your long-term growth. Stay invested, stay disciplined. History shows that what people – or even experts – think about the market is usually wrong. The best way to meet your long-term goals is just stay invested and stick to your allocation,” Adam said.
Doing so will help minimize any damage a rough market in 2022 may cause.
Remember, too: It’s impossible to make perfect choices since no one has perfect information.
“Collect your facts. Try to make the best decision based on those facts plus your individual goals and risk tolerance.” Adam said. Then, she added, “Let go.”