Why You Should Not Panic Sell During A Down Market
Many Americans are logging into their investment accounts with a sense of dread these days. How much more, you may be thinking, have I lost since the last time I logged in?
2022 has proven to be the worst year for the stock market since the financial crisis of 2008. The poor performance can be chalked up to a variety of factors, including rising interest rates, economic worries, the war in Ukraine, global inflation, the ongoing COVID-19 pandemic, and more. As of December 20, 2022, the S&P 500 was down by more than 19 percent for the year. It can be hard to look at as it relates to your investment or retirement accounts.
But experts have a piece of advice for you: don’t panic sell.
Watching your investment portfolio or your 401(k) plan that you have been building for years take a sudden dive is difficult to watch. You may have an overwhelming urge to sell up and salvage what you can. But in the long run, this can be one of the most damaging actions you can take.
Reasons Not to Panic-Sell
The market will likely come back. History shows us that downturns in the market are ultimately only temporary. In the end, large rebounds return most portfolios to the black in just a few years.
“Sharp, sudden market declines are disconcerting, prompting many investors to reduce their stock holdings, or pull out of the market,” according to analysts with MFS Investment Management. “As history has shown, financial markets have rebounded from market shocks, posting strong long-term gains. All too often, investors that have sold out during a crisis have locked in losses and possibly missed the rebound. Riding out market declines and benefiting from potential rebounds may be a better plan.”
It’s an opportunity to buy. As the saying goes, “When the going gets tough, the tough go shopping.” If you have some cash to spare, now can be a great opportunity to take advantage of undervalued stocks and purchase some, so your portfolio can bounce back better than ever when the market sees the upswing.
Consider a downturn “economic exercise.” Just as a body that never faces physical challenges will never get strong, economies that experience no turbulence should be viewed suspiciously. In order for continued growth to occur, regular downturns are necessary to find and eliminate market bubbles and adjust to intrinsic market prices.
Warren Buffet once famously said, “Our favorite holding period is forever.” While you may not be prepared to hold your investments forever, be certain that you’re selling for the right reasons and under the right circumstances. In a panic, a mistaken effort to stem more losses is not the right circumstance.
Seek Professional Advice
To gain the peace of mind that your financial plan can weather future market downturns, it may be beneficial for you to seek the advice of a professional who will be able to create a comprehensive financial plan that’s suited to your tolerance for risk.
At Toomey Investment Management, Inc. (TIMI), our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capturing money from prospective clients, but much less on service and accountability for existing clients. At Wallingford, Connecticut-based TIMI, we listen carefully, keep in touch, and return your calls and communications quickly, so you can count on us. We will work effectively to optimize your financial situation and solve your problems. Call us at 203-949-1710 or contact us for more information.