Today, I address the elephant in the room and some investing tips to wrangle it in our revamped Ask Us Anything video series.
I’m talking about fear while investing.
This question comes from Robert, who asked:
It’s hard to tell where the market is going today. One day it’s up, and the next, it’s down. A lot of my friends have gotten out of the market completely. What should I do?
That’s a great question, Robert. Thank you for asking.
Here are some investing tips that can help you make sense of it all. First, let’s talk about fear and greed.
2 Big Stock Market Drivers: Greed and Fear
Greed works two ways:
- To keep the money you have.
- To make more money.
Fear is similar:
- Fear of losing money.
- Fear of the market underperforming.
Certain factors drive a lot of fear in the 2022 market: high inflation, a recessionary economy and a market struggling to find its place.
It’s easy to see why investors are scared.
But let me tell you why it’s wrong to be fearful and the investing tips you need to make the most of this market.
3 Charts Illustrate Fear’s Possible Impact
Fear makes us do silly things while investing.
Robert’s friends selling off their entire portfolios is a great example. Another is ignoring the market for potential buying opportunities.
That’s the wrong thing to do right now.
The market is not where any of us want it to be — we’re realists and can’t deny that:
The S&P 500 has whipsawed over the last 12 months and is down 1.7% since this time a year ago.
It looks even worse when you track the S&P 500 year to date:
The index has been underwater outside of a couple positive days that kicked off 2022.
Since the start of 2022, the S&P 500 is down 8.8%.
Had fear overcome you, you might have done what Robert's friends did and sold off to guard yourself against losses.
Or you might have ignored the market and stopped buying.
But look at the recent run-up of the market since June:
Since June 16, the S&P 500 has rallied 17.7%!
If you pushed fear aside and sought buying opportunities, you could be sitting on gains even though the market is still down for the year.
3 Investing Tips for 2022’s Market
With that in mind, here are three investing tips to help you keep fear out of your portfolio in 2022 and beyond.
1. Keep emotion out of the equation.
The biggest message here is don’t trade with emotion.
Emotional trading leads to situations where you overleverage, double down on a losing position or remove stops from a losing position because you have hope for a rally.
To take emotion out of your investing, you must have a definitive plan when trading.
Invest only what you are willing to lose. If you aren’t comfortable losing even one dollar in a stock, then it’s time to reconsider.
And once you’ve found a stock you want to buy, establish a plan for that stock. If you are trying to capitalize on quick growth, create a plan to get out after the stock has gained (or lost) a certain percentage so you can lock in profits (or avoid major losses).
If the stock heads in the wrong direction … that’s where my second investing tip comes in.
2. Keep your stop-loss marks in place and follow them.
Even if you love a stock that falls below the stop-loss, get out.
You can always get back into the position when it's more favorable to do so.
3. Stop thinking about getting rich quick in the stock market.
For sure, you can grow your wealth.
But it doesn't happen overnight.
At Money & Markets, we believe in adaptable investing. And ignoring the market when it’s down is silly.
That’s why we seek out investment opportunities that thrive in whatever market situation we find ourselves in.
On that note, Adam is about to reveal a system that is designed to turn maximum pessimism into maximum profits.
Adam used this system to find big gains amid the sell-off that plagued the first half of this year: 140% in 51 days on the Russell 2000 index of small-cap stocks … 36% in 14 days on another Russell 2000 recommendation … and an incredible 221% in 87 days on CVX.
And he’ll have more on his powerful Max Profit Alert system soon.
To get added to the VIP guest list for his upcoming presentation, click here.
You don’t want to miss this opportunity to capitalize on a profitable system while others let their fear take control.
But for now, Robert (and anyone else that’s worried about this current market): Don't panic. Use these investing tips to your advantage.
Bottom line: Follow your strategy, get out of stocks that hit a stop-loss and use a system to find stocks that fare better in these market conditions.
(If you need a system, don't forget to put your name on the list for Adam's upcoming presentation.)
And thank you for your question.
We know it can be difficult to extract fear from investing, but know that Adam, Charles, myself and our entire team have your back every step of the way.
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Stock Power Podcast, as well as the Marijuana Market Update. He’s also a certified Capital Markets and Securities Analyst through the Corporate Finance Institute. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.