Investing in financial markets ought to be a long game for investors. This statement is more true now than ever. Volatility is at levels we have not seen in a very long time. This discourages some risk-averse investors from going anywhere near stocks today.
In this article, I am going to highlight a couple key reasons why investors ought to stay the course and maintain their investment strategy in this environment.
Perhaps the most obvious reason investors ought to remind themselves of the importance of staying the course is the long-term compounding effect stocks can provide. Having one’s money work while one sleeps requires a level of patience – sitting on one’s hands and doing nothing is often the best strategy.
Buying and selling one’s positions repeatedly in an attempt to buy the bottom and sell the peak often only results in an erosion of profits long-term, as fees eat away at the profit investors would have otherwise realized.
The other thing investors out to keep in mind is that downside volatility really represents opportunity. What is interesting about the stock market is the relative lack of enthusiasm many investors have with respect to buying great stocks on sale.
If a smartphone is offered at a ridiculously low price, many will jump at the chance to buy; when stocks go on sale, many investors head for the doors. Long-term investors should become near-term buyers should volatility pick up again and stock prices drop meaningfully again.
Invest wisely, my friends.
