3 Moves Every New Investor Should Make To Master Market Chaos
Written by
Laura Bogart
Edited by
Kristen Mae
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Maybe you’ve reached a point in your financial journey where you’re ready to start investing. You’ve been so excited to explore the market and learn how to grow the seed of your investment into so much gorgeous green. Then, you check the news. And it is not good.
The thought of starting to invest now feels like dipping your toe into a storming sea. How on earth could a newbie like you possibly swim in such volatile waters? Take a deep breath and relax. You’re not doomed before you even begin. There are ways for new investors like you to navigate the market chaos.
GOBankingRates chatted with a few experts and did some research to help first-time investors make smart moves — even in stormy conditions.
Don’t Spiral Out Emotionally
Chris Berkel, investment adviser and president of AXIS Financial, knows that seeing the markets go up and down can cause significant discomfort, even outright fear. While it’s good for people to remember that, mathematically, volatility is just a standard deviation — after all, there’s a reason people commonly say “markets go up and down” — it’s hard to take the emotions out of these money matters.
“If we think of possible outcomes as a bell curve, and if we were totally emotionless beings, then we would feel the same way about a 20% up move as a 20% down move,” he said. “But let’s be real, we’re human, and 20% down feels way worse than 20% up since the money is mentally tied to something like a vacation, a car, a house, [or] kids’ college.”
His advice? When it comes to weathering those ups and downs, try to limit the emotional connection to what the money represents as much as possible. Berkel says using this approach will help you rely on data instead of raw emotion in your decision-making.
Think About the Products and Services That Will Always Be in Demand
Taking a simplified approach to investing can ease some of the anxiety it causes: Remember, no matter what the economy is doing, there are certain products and services that people are going to continue to need — and the companies that make them can continue to be profitable.
“When investing, our simplified approach is to invest in businesses that earn and grow profits by making products and services that people need,” said Berkel. “That helps us not only be more confident in the long-term viability of the businesses we own, but also makes them more appealing when the market drags them lower.”
In other words, essential businesses — think everyday consumer staples, utilities or health care — tend to be more resilient in a shaky economy. Starting here can be a smart strategy for new investors.
Diversification Is Your Best Friend
Berkel also recommends that all investors, including beginners, diversify their portfolios. For the uninitiated, diversifying means owning a mix of asset classes and investment types. The benefit, as Berkel explains it, is that “as part of the portfolio zigs, another can zag.”
He adds that traditionally, diversification has meant a combination of stocks and bonds. But there are times when stocks and bonds are correlated, meaning they’re both moving in the same direction — and investors may not be as protected as they think. For true diversification, Berkel recommends considering alternative investments.
“We are big fans of using gold as part of a diversified portfolio because it is traditionally uncorrelated with both stocks and bonds,” he said. “This is the best way to build a robust portfolio to withstand and adapt to changing market dynamics.”
Bottom Line
Investing might feel daunting at the moment, but that doesn’t have to deter new investors from exploring the market. By learning to separate your emotions from the market, focusing on companies that meet consistent demand, and embracing diversification, new investors can lay a strong foundation for building wealth.
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