Avoid the pitfalls of emotional investing

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Keep emotions in check and rely on strategies to help you reach your goals

These days, almost any political, economic and global event can suddenly cause investment market volatility. It’s natural to react to such activity emotionally, especially in a down market.

When these emotions guide your investing decisions, it can lead you to make choices that don’t line up with your goals — and can even prevent you from reaching them. Here’s how:

  • Anxiety over falling prices can cause you to sell or trade an investment too soon
  • Confidence that prices will continue rising can cause you to keep an investment too long or try to time the market
  • As the chart below shows, withdrawing money in a downturn and missing a few top-performing days can greatly affect your returns.

Missing the market’s best days has been costly

Chart showing the S&P 500 Index Average Annual Total Returns from 1994 to 2023. The chart shows the difference in being fully invested for all of the days with an initial investment of $10,000 versus missing the best 10, 20 and 30 days. A person fully invested for all of the days could potentially have earned $181,763 dollars. If they missed the 10 best days: $83,272; missed the best 20 days $48,874 and missed the best 30 days $30,889.

Instead, consider using strategies such as these to stay on track:

  • Make a long-term plan. It will help you remain calm and stay the course when the market is changing. Your retirement plan provides tools and support to help you create a well-designed long-term plan.
  • Continue making regular contributions. This helps reduce the impact of market swings because you’ll buy more investments when prices are lower and fewer when prices are higher. Increasing contributions throughout your career can help steadily build your portfolio.
  • Commit to increasing your contribution amount annually or at least as you’re able. Increasing your contribution amount, even by a little bit, could make a big difference in your account at retirement.
Ready to put these strategies into action?
Contact your retirement plan specialist.

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