(WTNH)– The recent downturn in financial markets can be an opportunity for investors to buy in at a deep discount.
But for others, it can lead to mistakes that ultimately have a large negative impact on their portfolios.
Chartered Financial Consultant John Caserta explains what investors should be doing with their portfolios during a turbulent market:
· Consider your ultimate goal.
o Do you need the money today or at some point in the distant future?
o Make sure the allocation of your portfolio – what you’re actually invested in – is in line with your goal.
· Check your appetite for risk.
o If the recent performance of your portfolio is causing you anxiety, it might be an indication that you don’t have the right investments for you.
o Talk to your advisor about what steps you should take.
· Avoid making short-term changes.
o Becoming more conservative after a dramatic drop can make it difficult to regain any losses. Before making any changes, consider your long-term goal.
o Trying to time the market can have a real negative impact on your long-term results. It’s difficult to know when to get in or out of the market.
Here are common mistakes that Caserta says people make during times like this:
· Head for the hills!
o Investors fail to put events into perspective and that can lead to making short-term changes in a portfolio – like moving in and out of the market – that can affect negatively affect long-term results.
· Going all in!
o It’s tempting to look for opportunities during times like this and get swept up in the frenzy – maybe it’s a biotech firm racing to find a vaccine or a tech company developing solutions for a changing workforce.
o Consider Zoom – Investors rushed to buy Beijing-based Zoom Technologies thinking that it was the provider of Zoom (which is really California based Zoom Video Communications).
o People look at turbulent markets and decide to wait until “things calm down” before investing. The problem is knowing when to get back in can be difficult (or nearly impossible).