Market uncertainty is a certainty
Author: Sound Choices
May 1, 2019
While market volatility causes uncertainty, its occurrence is actually a certainty. This series of articles provides insight to help put volatility into perspective.
Investing – especially in equity markets – is not always a smooth ride. Volatile markets can cause investors to respond emotionally, rather than rationally. Their investment decisions become based on either fear of losing money or fear of missing out on potential high returns.
Don’t get caught on an emotional rollercoaster
As markets rise, investors often feel like they are missing out. When they finally enter the market, the market rise may be near its end, and they can only watch with dread as markets decline. After suffering losses, investors may fear further losses and proceed to sell.
This process repeats itself over and over again. It has been said that investors are driven by greed as markets go up and driven by fear as markets go down, but whatever drives investor decisions, the ability to stay calm and rational during volatile markets can be an important learned skill.
*Annualized return for S&P/TSX Composite Total Return Index. Source: Morningstar Direct data to December 31, 2018. This information is for illustrative purposes only. Past returns are not indicative of future results.
Watching markets go up and down can be trying. Staying focused on the long term rewards investors. If you’re concerned about market volatility, contact your financial advisor.
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