How do I invest when the market is going crazy?

Checking the news constantly will increase your anxiety.

Thanks to @bhavesh1024 for this excellent question.

When everyone around you is panicking about market downturns and recession on the horizon, how can you avoid the crazy sell off?  And importantly, how do you ensure that those around you make good decisions as well?

These are chaotic times and – no matter what experience you have with financial crises – it is a challenge to remain level headed and not get caught up in the worry.

The first thing I want to say is this: DON’T SELL EVERYTHING!!  If you are invested in assets, now is the time for what professionals like to call ‘rebalancing’ – not a fire sale.

The economy moves in cycles, there are growth periods and there are recession periods.  Booms and busts are temporary and will not last forever.  This, too, will pass.

Tip #1 – Shield yourself from the stress

Anxiety is contagious, and it is very likely to cause you to act in ways you will regret in the future.  Avoid looking at your portfolio every day.  It’s exciting when it’s increasing, and terrifying when it’s going down.

If the constant news about inflation, cost of living crisis and recession is making you uneasy – you are allowed to stop looking at it!  You know it’s happening, there’s no need to remind yourself about it constantly.

Give yourself some worry time where you can look at the news if you must – and then leave it.  Your worry time might be 15 minutes in the middle of the day to catch up on updates, or once a week, or even once a month.

Do not talk about how ‘bad’ things are, unless you can do something to change it.  In that way, you avoid spreading the anxiety to other people unnecessarily.

Tip #2 – Remove the heart attack factor

If you must fiddle with your investments, target the riskiest assets first.  Consider if you really want to hold crypto (I don’t) or how much money you have in stocks that bounce up and down in value.

Look at your worst performing asset and consider selling it (even if it’s at a loss).  This will reduce the volatility in your portfolio.

Tip #3 – Embrace boring assets

Continue to invest in well-diversified, low fee, index funds which reflect your long-term investment goals.  Boring is beautiful.  Investments are supposed to be boring.  If you really want excitement, try skydiving.

When asset prices go down, it can be a great investment opportunity to ‘buy the dip’.  That is, buy stocks and shares when they are priced low.  Think of it as a mid-year sale on your favourite boring investments.

Tip #4 – Set and Forget

Do not make any decisions in a rush or when you are feeling particularly worried.  Make small adjustments in your investments – not big changes.  Avoid tinkering with your portfolio and check it once every three months (at most), in order to rebalance.

Even better – set up an automatic investment program – and then forget about it.

Tip #5 – It’s about time in the market

So much research has been done on the best way to accumulate wealth by investing in markets.  And the results point in the same direction: the longer you can stay invested in the market, the more growth you can accumulate.

Nobody can predict the future – not even professional investors.  It’s a fool’s game to try to time when the market will go up and go down – so don’t try to do it.  Invest early, and invest for the long run (i.e. 5+ years when you’re looking at stocks and shares).


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