When the markets are choppy, it can be scary as we watch our investment accounts go up and down. Understandably, many of us will feel the impulse to try and do something to get off of the bumpy ride. But I’m here to tell you to take a moment before you act because knee-jerk decisions can often lead us astray.
It’s important to keep in mind your timeline. For me, I’m investing for my retirement which is many years down the road. So I don’t have plans to use the money I’m investing any time soon. I also try to remember that the goal is to buy low and sell high. If I get out while the markets are volatile, I might be doing the exact opposite.
To avoid guessing how the markets are going to move each day, I like to stay disciplined with a monthly investment program. This way I’m actively and consistently investing — when the markets are low, I might be getting a bargain; and likewise, I know there will be times when I buy while the market is higher. At the end of the day, I’m averaging out my investments.
Finally, if you need professional help, don’t hesitate to call your financial advisor or the people who service your 401(k). Work with them to ensure your investments are appropriately diversified for your age and goals. The key is not to panic, stay rational and to keep your long-term goals in mind.
Dollar cost averaging is the practice of investing a fixed amount of money at regular intervals, regardless of whether the securities markets are declining or rising. A program of regular investing does not assure a profit or protect against loss in a declining market. You should consider your financial ability to continue to invest through both up and down markets.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.