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Wild stocks this week in the stock market may tempt you to make changes to your portfolio.
Shares fell sharply on Thursday after Russia launched Fr. military strike in Ukraine. The President Joe Biden condemned the attack, saying “the world is holding Russia accountable.”
Yet experts will tell you over and over again never let emotions control your investment decisions.
This is because sudden falls and sharp rises in the stock market are a normal part of the investment path, said financial adviser Mitch Goldberg, president of ClientFirst Strategy in Melville, New York.
“What matters is what you do before the dive, not the hasty reactions that occur during and after when you don’t have time to think,” Goldberg said.
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While market experts have said they see no signs of panic in the market, it is normal for people to feel this way during increased volatility, said financial psychologist Dr Brad Klonz, an associate professor of financial psychology and behavioral finance at Haider University in Crete. College of Business.
These feelings are partly due to the fact that the emotional brain is more and more powerful than the rational brain, he explained.
“Panic,” said Klonz, “[but] don’t panic about what you’re panicking about. “
In other words, when it comes to the stock market, acknowledge your emotions – but don’t act on them. This is about whether you want to sell during a big fall or buy during a rise.
Of course, refraining from acting may be easier said than done. Here are some techniques to calm your emotional brain so you can make more rational decisions.
Remember the past
When the stock market falls, remember this is not the first time.
“The stock market has overcome so many obstacles,” Goldberg said, pointing to Sept. 11, the Great Recession and the 1987 market crash.
Spend some time between your impulse to act and your behavior.
Brad Klonz, financial psychologist
“What happened every time? the stock market has recovered and reached new highs. “
Klonz, who is also a certified financial planner, agrees. In fact, he said young investors, who have only witnessed the bullish market, are more likely to be emotionally charged during prolonged volatility.
“They have never had such an experience,” he said.
Take deep breaths
Consult a specialist
What’s more, consulting with a financial expert will not only help you assess the accuracy of your thinking, but will also give you something else you need: time.
If you can’t afford a financial advisor, at least talk to someone before making an investment decision, Klonz said. That is, until they also panic.
“The goal is to spend some time between your impulse to act and your behavior,” he explained. “If you can spend some time between these two things, you’re more likely to calm your emotional brain, get a rational brain, and make a good decision.”
Consulting with an expert will also give you the opportunity to reconsider your approach to investing and assess your level of risk. Perhaps your portfolio is not as diversified as one would like.
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