Investing When the Market May Look Scary
Have you ever felt hesitant about investing when the market seems unpredictable or scary for many? Maybe you've held back, waiting for the “perfect moment” to jump in, only to find yourself missing out on big opportunities? Don't worry, you're not alone. This is a common situation that repeats itself by many.
Today, we're looking at the topic that is scary for many new investors… Investing during market volatility. Many see market downturns as losing money while many of the best investors have those times as a tremendous buying opportunity because they have already planned for it. One investor many know of is Warren Buffett who once said “Be fearful when others are greedy, and be greedy when others are fearful."
Financial planning and investing with a plan are a tremendous examples of this. But here's an important piece… When it comes to investing, it's helpful to zoom out and take a broader view. Think of it like building a company – it wasn't accomplished in a single day, and neither is most people’s path to financial freedom (regardless of what you see on social media). Just as there are scary events in the market, there are also amazing ones. A key for many of the best investors is to focus on the long term.
So, let's zoom out together and look at the bigger picture. Instead of getting caught up in the day-to-day fluctuations of the market, let's focus on what you can control – your plan. Here are some simple steps to get started:
Know Your Cash Flow: Understand how much money is coming in and going out each month. This will help you determine how much you need in safer money for when we do go through market downturns.
Contribution Rate to Investments: Decide how much of your income you want to allocate towards investments. Even small contributions can add up over time.
Long-Term Investments: Identify what portion of your assets you may want to try to have grow because you won’t need them for multiple years. Many investors choose to look at owning stocks because of the growth potential and tax benefits.
Set Clear Goals: What are you investing for? Whether it's retirement, buying a home, or funding your children's education, having clear goals will help guide your investment strategy.
Time Horizon: Consider how long you have until you need to reach your goals. This will influence the level of risk you're comfortable taking with your investments.
Remember, these are just the basics to get you started on reframing how you think about investing.
By focusing on what you can control and taking a long-term perspective, you'll be better equipped to navigate the ups and downs of the market with confidence. So don't let fear hold you back – embrace the journey towards financial freedom!
Disclosures:
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. AI (artificial Intelligence) sourced articles may be prone to error, due to the vast information they assemble from the internet. Always confirm any questions or concerns you may have with an experienced professional. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual