Fri, March 29, 2024

Don’t panic! Patience is the key to weathering uncertain stock market, financial advisor says

The stock market seems stuck in a downward slide in recent days, and that has made some people nervous about their investments. But Ryan Borders, a certified financial planner with Richard Young Associates in Augusta, says now is the time to wait, not panic.

“It is tempting (to panic) because we’re emotional beings,” Borders said. “But you have to take a broader approach. Technically, you’re not losing any money until you sell.”

Borders said there are two opposing approaches to investing – time in the market vs. timing the market. Time in the market means riding the highs and lows over the long term, while timing involves pulling money out and putting money based on trends and analysis of when the market drops or rises.

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But Borders said the timing is tricky and often doesn’t work out.

“It’s a portfolio killer when you do that,” he said. “If you look at it historically, people don’t do well when they do that. Even professionals don’t do well.”

Instead, he advises putting a good plan in place, being broadly diversified, and staying in the market. Since 1950, in about 75 percent of the years, the market was up and only down 25 percent of the time.

“Historically, the market comes back and then some,” Borders said.

As an example, he pointed to the sudden market drop in March 2020. Some people pulled out and converted their stocks into cash. But when the market rebounded just five months later, they missed the entry point and never recouped their losses the way those who stayed in the market did.

In a hypothetical example, Borders said that a person who invested $1,000 in the stock market in 1970 and left it there would have seen his portfolio grow to $121,000 by the end of 2020. But if that investor had missed just the one best day during that entire period, it would have decreased his total by $12,000. Missing the five best days would have cost him $44,000.

Ryan Borders

Not only does Borders advise his clients to stay in the market during a downturn, but like many other advisors, he encourages people to invest more money because they can buy shares at lower prices. With inflation currently at 8.3 percent, cash has less value than before.

“Your dollar’s not growing in a checking account,” he said.

Perhaps his most sage advice is to turn off the news.

“It’s good to know what’s going on but don’t immerse yourself in it,” he said. “When you’re looking at the news, you’re only seeing a small section of the stock market. That just makes people nervous, and they make bad decisions when driven by fear.”

He recommends shifting the focus from what you can’t control to what you can control, which means creating an investment plan that caters to your needs and risk tolerance. That includes diversifying globally and managing investment expenses well. Most of all, it means consistency.

“Stay disciplined through the market’s dips and swings,” he said. “Historically, that’s where people have succeeded.

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