Two investors explain why market timing backfires and what actually works: buy and hold, automate contributions through retirement plans, and diversify across sectors and regions. Missing just the market's best days can wreck long-term returns.
How do you react when your investments go down? Even experienced investors sometimes overreact to short-term drops in value.
Market volatility has become a key fact of life. Today we'd like to show you how to maintain a long-term view and keep short-term ups and downs in perspective. In the face of market volatility, consider using a buy-and-hold investment strategy.
The opposite strategy, called market timing, is risky since it means guessing which direction the market is going to go next. You could lock lock in a loss or miss the market's best days by selling at the wrong time.
Retirement plans can help take the guesswork and emotion out of investing by committing you to invest a fixed amount on a regular schedule. As a result, your average cost per share may be lower than the average price per share over time.
And when markets are volatile for a protracted period, consider different ways to diversify and help reduce risk, such as investing across market cap sizes, sectors, regions, or countries.
Remember, price swings are to be expected, and while past performance does not guarantee future results, the stock market's historical track record shows a long-term pattern of overall growth.
So when markets get choppy, keep a long-term perspective and stay focused on your investing goals.
