Is Your Investment Strategy Resilient to the News?

When investors take a reactionary approach to the headlines, their investment strategy suffers.

Despite the market’s persistent growth over time, investors may often be tempted to think that the current lull is different, that this time it won’t recover. The result is poor decisions applied to an investment strategy.

The Uneasy Thoughts: From the start of the pandemic in 2020 to the conflict in Ukraine, when news hits the headlines, people get uneasy. They click back to the news over and over again to get the latest updates, further driving their stress and leaving them consumed by what’s happening in the world and what could be coming next. In 2020, there was a 59% increase in the number of sessions spent looking at news apps. Daily installs of news apps increased by 53%.

The Temptation: When bad news is dominating the news cycle, and you hear phrases like “record-breaking” or “worst day ever,” you may be tempted to make your investment strategy less risky. This is a natural reaction. Losses are painful; loss aversion research shows that losses feel about twice as painful as gains feel good.

As mentioned above, there’s always a fear that this time the market won’t recover as it has in the past, that this particular incident carries unique qualities that make it insurmountable. But when you consider events such as high interest rates and the Vietnam War in the late 1960s and a corresponding drop of 36% in the market, it may be hard to argue that similar forces shaping the market in 2022 can’t also experience a recovery.

The Real Risk: When news headlines cause anxiety and you are tempted to pull money out of the market, it’s a good idea to consider that reactionary investors may not be as successful at growing their wealth over time as investors taking a consistent approach. In fact, market downturns can provide a unique opportunity to take advantage of low prices – and historically, some of the best stock market periods have come after some notable slumps.  

The Solution: Anxiety that’s tied to the news and investing is real, and it can cloud your decisions and feelings about your investments. But that’s why trusting your investment advisor can make all the difference. They can help demonstrate how the time-tested principles of investing may be more successful than reacting to headlines.

Still feeling anxious about the economy? We understand. Contact us at Lawson Kroeker to make an appointment with one of our advisors and we can talk through your concerns and create an investment strategy that opens the door to a new confidence boost.

 

 

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