Financial Investing in Times of Crisis – iWorks Corp
By: Lisa Eichelberger
The COVID-19 pandemic has affected all of us, including our financial decisions. When it comes to crises and uncertainties in the financial market, it is easy to make fear-based decisions about financial investments without considering the long-term effects of those decisions. Historically, the market experiences periods of volatility (fluctuations between declines and increase). While we may have little control over the market, we do have control over how we respond to changes within the market.
Market volatility is a normal part of investing1. Market volatility is impacted by things like taxes, interest rates, inflation, and events like COVID-19 or natural disasters that impact supply and demand. The amount of volatility in the market directly affects investment risk. What’s helpful to remember is that the market is resilient and tends to trend upwards over time. Data shows that the market typically goes up after a downturn and will return a 6-7% return over the course of the next decade2.
You may be concerned about things like your 401k or other retirement accounts. Rather than making an emotional decision to avoid perceived risk in the short-term, keep the big picture in mind. Dips and fluctuations in the market are normal and do not mean that you should sell quality investments or change what you are doing. The best decision is to keep working towards your long-term investment goals and not change how you invest your money. It may feel counterintuitive to do so, but experts encourage people to lean into the volatility of the market.
The best time to invest your money is when it feels the toughest to do so. Resist the urge to pull your money out, sell your investments, and hide it under your mattress for a better day. Keep your long-term goals in perspective. If you are unsure of what to do, schedule a meeting with your financial advisor, which your company may provide you as part of your Benefits package. Your advisor can help you determine if rebalancing your portfolio would be beneficial to help you achieve your long-term goals.
Dimensional Perspective, “Recent Market Volatility,” August 5, 2020, https://us.dimensional.com/perspectives/recent-market-volatility.
The Vanguard Group, “Top 8 questions on investing in the current climate,” June 8, 2020, https://investornews.vanguard/top-8-questions-on-investing-in-the-current-climate/.
- Dimensional Perspective, “Recent Market Volatility,” August 5, 2020, https://us.dimensional.com/perspectives/recent-market-volatility.
- The Vanguard Group, “Top 8 questions on investing in the current climate,” June 8, 2020, https://investornews.vanguard/top-8-questions-on-investing-in-the-current-climate/.