Investors ‘Are Pretty Afraid Right Now,' Financial Psychologist Says. These 2 Steps Can Help
Many people are afraid right now due to the high amount of uncertainty in the world.
Brad Klontz is a certified financial planner and a licensed psychologist. He said that we are in a time of great uncertainty.
Fear can cause people to make bad financial decisions.
We're experiencing high financial instability due to high inflation, the possibility of a recession, and market volatility. Many investors are "pretty afraid right now," according to
Brad Klontz
, a certified financial planner and a licensed psychologist.
When we are stressed, our frames of reference become shorter, according to Klontz, a CNBC member.
Financial Advisor Council
Other words, the uncomfortable moment seems to be all that matters.
Klontz explained that while this tendency has helped us survive in stressful situations, it can also make us "absolutely do the wrong thing" when it comes time to invest.
Klontz advised that instead of acting impulsively, you should follow these two steps.
Remember why you invest
Klontz stated that most of us are investors who invest for the long term. Does looking at a very narrow frame of references make sense to you? He asked.
No, if you are investing for retirement. You may not need the money for many years. The S&P 500's performance over the past few months or years shouldn't be too important.
After adjusting for inflation and zooming out, you can see that the average annual return of stocks between 1900 and 2017 was about 8%.
You can also read about it here
Steve Hanke is a professor of applied economy at Johns Hopkins University, Baltimore.
If you are unable to withstand bad times in the stock market, then you will also struggle with the future.
Don't miss out on the best ones
Experts say.
The S&P 500 has produced an annual average return of around 6% over the past 20 years. If you sold your stock at the worst time in the market, then reinvested, you would see a return of just 0.1%.
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Charles Schwab provides an analysis.
Consider: Where is your money going?
Most people don't save and invest only for long-term objectives like retirement. You may need to adjust your strategy if market volatility causes you stress.
Klontz explained that if you are investing for a short-term goal, such as buying a house or car, you may be hurt. When you need the money, it could be down by 10%, 20%, or even more.
You may prefer to save for future milestones by opening a high-yielding savings account or certificate of deposit.
Experts say
.
If you are planning to retire, now is the time.
Toss your portfolio towards safer assets
.