Many novice stock investors began actively trading during the onset of the COVID lockdown, believing that picking winners was relatively easy. But the current market downturn has brought them back down to earth. They’ve learned that actively buying and selling securities successfully for an extended period of time is quite difficult.
It isn’t easy money as they initially thought. Just ask the majority of investors who have endured three consecutive painful quarters.
In a strong bull market, novices can appear to be brilliant, but over time, the markets have a way of humbling new and experienced investors alike.
Professional money managers are supported by research teams and have access to an enormous amount of historical data. And it’s their full-time job. That’s why it might be prudent to consider turning your money management over to the professionals. Especially now that people are commuting to work and outside life is trending back to normal.
With a full-time job and a family, it’s a difficult task to actively manage and trade a portfolio. Many investors turn to professional advisors to help them with their financial planning and investing. Maybe it’s something you should consider.
As we begin the final quarter of the year, it’s been a dreadful stretch for nearly everyone. In the past, the bond portion of a portfolio helped compensate for difficult times with stocks. But that’s not happening this year. With both bonds and stocks down in value for the year, it is almost impossible to find shelter during this financial storm.
In the simplest terms, the numbers show we’re in a bear market. Everyone is feeling the pain and it’s easy to visualize the markets tumbling even further.
Bear markets are like real bears in that they can bring instant fear. Woodsmen advise not to panic and run from a bear. As an advisor, I think that’s wise advice for investors as well. Nobody can predict the future, but historically, bounce backs have been sudden and unexpected.
For investors who are waiting for things to get better, I have a question. When in recent history has the economic environment ever felt calm? A day rarely goes by without some sort of controversy, either domestic or foreign. Investment momentum can change in the blink of an eye, and often without rhyme or reason.
The bottom line is that investors should take a long-term view. At the very minimum, that means 36 months. But I believe most should be thinking more like 7 to 10 years. By taking a long-term view, you’re putting yourself in a better mental state to ride out difficult times. You know, like we’re having now.
During the height of the pandemic, people had an abundance of time as they worked from home. Many dabbled in individual stocks for the first time, and many became overconfident in their abilities. This year’s market downturn has brought them back to reality.
Young or old, novice or experienced, investors need to be mentally prepared for a rough fourth quarter. That being said, don’t be surprised if a year-end rally appears from nowhere. The investment world is simply unpredictable. Ups and downs come and go.
I’m confident if you keep your wits about you and take a long-term approach, you can better ride out difficult times.
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.