Dealing with Losses
Early April showered us with a few days of strong stock market losses. The S&P 500* lost nearly 5% one day, followed by 6% the next day for a total drawdown of 18% from recent highs.
When such strong losses occur, it is totally natural for our brains to go haywire. The losses, accompanied by negative headlines, feed our anxiety and can trigger strong urges to get to safety by selling now and asking questions later.
But following those urges is seldom the best response. A better response is to take a step back regain composure. In my experience, I have found the following three actions to be helpful during difficult market times.
3 Steps to Composure
- Take a break from the daily headlines and constantly changing account values. Not all information is beneficial.
- Ground yourself in a few important and enduring investing truths
- Markets are resilient. We have been through much worse in the past and markets have always recovered.
- While selling will bring immediate relief, it can be a costly endeavor as markets move quickly and unexpectedly – as they did on April 7.
- Markets have always been volatile, but for investors who stayed the course they have rewarded them with significant wealth
- Contact me – let’s talk about it. No matter your concern, thoughts, questions. Anytime. Whatever it is…let’s talk through things, including the plan and strategy developed to help you reach your goals.
That’s what we’re here for!
© The Behavioral Finance Network
Raymond James is not affiliated with nor endorses the opinions or services of ©The Behavioral Finance Network
*The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the author and not necessarily those of Raymond James.
