To say that 2022 has been a rough year for investors would be a pretty accurate statements. Stocks fell into correction territory earlier on in the year, and after staging a brief recovery, investment values are once again falling. We can thank a host of factors for that, from tensions overseas to higher-than-average levels of inflation.
If you're concerned about your portfolio, you may be thinking about pulling your money out of the stock market and choosing safer investments. But here are some reasons that's a big mistake.
1. The market is likely to recover
The stock market has seen its fair share of corrections and full-blown crashes. And while events like that can be unsettling, it's important to remember that the stock market has a strong history of recovering from downturns and rewarding investors who stick with it.
2. If you sell stocks when they're down, you'll lock in losses
It's frustrating and stressful to see your portfolio value drop. But do remember that what you're seeing is an on-screen loss — that is, if you don't rush off and dump your stocks while they're down. As long as you leave your portfolio untouched, you won't actually lose any money — even though you'll be looking at a lower account balance than you'd like.
3. If you're investing for the long haul, this blip won't matter
If you're starting to inch closer to retirement, it may be time to rethink your investing strategy and consider moving some money out of stocks. But if you're investing for retirement, and that milestone is 20 years away, there's no need to concern yourself with the occasional market sell-off. If you keep your portfolio intact, there's a very good chance that in 20 years' time, you won't even remember this recent period of volatility.
How to weather the storm
While it's certainly not a good idea to pull your money out of the stock market right now, one thing you may want to consider doing is assessing your portfolio and making sure it's adequately diversified. If you're too heavily loaded in a single market sector, your personal recovery could take a lot longer.
One easy way to diversify on the fly is to load up on broad market ETFs, or exchange-traded funds. ETFs make it possible to scoop up a large number of companies with a single investment, and if you're the type who's skittish about picking stocks during periods of market turbulence, they're a good bet.
If you're not a fan of ETFs — say, because you prefer to have more control over your investments — take a thorough look at your portfolio and see if any market sectors are over- or under-represented. You may need to do some shifting to ensure that your investment mix is nice and spread out.
All told, it's been a rough go for investors, but do your best to stay cool and collected while stock values fluctuate. It may take a while for the market to settle down, but if you stay the course, you're more likely than not to come unscathed.
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