The stock market is inevitably volatile. Its nature is to rise and fall in the short term and level out in the long term. However, following the ups and downs of an unstable market is especially stressful during a pandemic that has impacted the global economy so heavily.
Watching your investments fluctuate rapidly can be disheartening, and you may be uncertain about what you should do next—or just as importantly, what you shouldn’t do. Below, the members of Forbes Finance Council share 13 investment “don’ts” to help you navigate this turbulent time in the stock markets.
Members of Forbes Finance Council share investment moves you should avoid during times of market fluctuation.
Photos courtesy of the individual members.
1. Don’t buy low-quality stocks.
Market volatility such as we are experiencing this year can often entice investors to buy stocks that have been beaten down and are of low quality in terms of profitability and balance sheet strength. These should be avoided! Market volatility of this kind is an opportunity for investors to upgrade the quality of their investment portfolio by selling troubled investments and buying better quality. – James Demmert, Main Street Research
2. Don’t lose sight of your priorities and goals.
All of us will have both short-term needs and longer-term goals. When reevaluating your investments, be clear on which of these two the investment serves. If you have near-term priorities that require cash, then raise that cash. But once you have covered those, ensure you stay invested for your long-term goals too. – Jonathan Hudacko, Just Invest
3. Don’t let anxiety make the decisions.
Don’t allow fear and anxiety to cloud your decision-making. Investment positions should be long-term bets based on long-term fundamentals. Arguably the most fruitful investing occurs during times of market volatility and uncertainty. Drown out the anxiety and fear and focus on long-term, fundamentally sound investments that can be purchased below their long-term value. – Ryan Swehla, Graceada Partners
4. Don’t panic.
In times of marketing volatility, it is very important to think rationally. There are many factors to consider before making moves within your portfolio. Most market corrections are relatively short-lived, and even in extraordinary times, the market tends to rebound and outperform its previous records. If you hold tight, you can likely recover any losses and even come out better. – Justin Brock, Bobby Brock Insurance
5. Don’t go for penny stocks.
People tend to prefer to buy cheap stocks. They have the idea that they are getting a “better price” or “deal” than when they buy blue-chip stocks like Amazon and Apple. A huge don’t, especially in times of uncertainty, is to invest in no-name stocks. There is a reason why penny stocks are worth cents. Sure, you can hit the lottery from time to time, but the risk-reward ratio is not worth it. – Gabriela Berrospi, Latino Wall Street
6. Don’t stray from your financial plan.
Someone once told me that the only certainties in life are death, taxes and market volatility. As such, it is important to know the value of your investments and stick to your financial plan. Don’t let your emotions take over. Speculative, fear-driven actions often lead to financial consequences. – Robert Reeder, GlassView
7. Don’t wing it.
Most people never get lucky with the market. If you’re really interested in participating in the market during extreme volatility, you should seek the advice of a professional to help you navigate and minimize your mistakes. – Drew Gurley, Redbird Advisors
8. Don’t check your accounts every day.
In times of uncertainty and market volatility, our natural tendency is to want to know the impact on our personal finances. If you know the market is low, checking your balances and seeing them lower will only make this cycle worse and cause you to want to make an emotional decision. Don’t look and know that the market will come back. – Kelly Shores, GCubed, Inc.
9. Don’t ignore the lesson about planning.
The times that we are living in are teaching us an important lesson about planning that we shouldn’t ignore. Don’t wait until a market crash, pandemic or crisis to diversify your portfolio. Whether you do so through your IRA or personal funds, investing in intangible assets like gold, real estate and other alternative investments may help avoid massive losses when the market goes sour. – Jason Craig, IRA Resources, Inc.
10. Don’t act on stale data.
In a rapidly developing environment, a lot of information is stale. Analysts have not yet reduced the EPS forecast to reflect the new reality. Rating agencies take time to lower firms’ credit ratings. Economists are slow to cut the GDP growth forecast while a deep recession appears inevitable. Firms do not cut dividends immediately, and dividend yields may seem abnormally high. Don’t make the same mistake. – Cutler Knupp, The Haskell Company – Dysruptek
11. Don’t ignore the potential risk impact.
If the volatility in your investments makes you highly uncomfortable, it’s time to check in on the level of risk your portfolio carries. Depending on your current financial state and place in life, risk tolerance changes over time. Once the market levels off, look into adjusting your overall portfolio to something you are more comfortable with maintaining. – Jared Weitz, United Capital Source Inc.
12. Don’t sell based on a negative return.
Don’t think with your heart when you view your investment statement. A negative return does not always mean that positions should be sold. In fact, if you had previously developed a clear financial plan and allocated your investments to align with this plan, nothing has truly changed to warrant an allocation change. – Meredith Moore, Artisan Financial Strategies LLC
13. Don’t get too excited about ‘up’ days.
Bear markets can be an excruciating rollercoaster not only because they go down, but also because they come with several relief rallies. This is the time when optimism briefly re-emerges before getting squashed by another leg down. If you want to grow your positions, do so on “down” days and try to refrain from getting too excited about “up” days. Too many buy high and sell low, repeatedly. – Felix Hartmann, Hartmann Capital
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
