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Money Talks | Common mistakes in a market downturn

When the market turns, don't get emotional, instead, stay focused on your long-term goals.

TEMPLE, Texas — Investing in the market can certainly test your emotions. Especially in a downturn or a correction like we are seeing now!

But take it from a professional investor who is not emotional at all when it comes to money. 

Certified Financial Investor, Neil Vannoy says, there isn't a reason to watch every single mover of the market and your investments. Telling 6 News, “There isn't a reason to watch every move of the market and your investments, especially if doing so causes you stress and leads you to make changes to your portfolio based on emotions. If you follow a solid investment strategy and have a properly diversified portfolio, then you can tune out when the market gets volatile and go do something you enjoy."

Another top rule of thumb is, don't sell, that only locks in your losses.

In a downturn, you don't have real losses, only losses on paper! "The first reaction of many investors to a downturn is to sell their investments and stay in cash until the market gets back to normal. The problem with this strategy is that volatility and uncertainty are normal for the stock market. By moving to cash, you turn paper losses into real losses and then have to risk getting back in too late and missing gains or getting back in too early and suffering more losses," Vannoy says.

Neil Vannoy also reminds us that this may be painful and frustrating but is also very normal and can lead to future gains in the market. "Volatility is normal for the stock market, and during downturns, your portfolio will decline in value. But that doesn't mean that you lost money. Selling during a downturn is what turns volatility into a loss, so make sure you own a very diversified portfolio and never put money in the market that you'll need to spend soon," he says.

So here is the good news in the market that we are seeing this year! Everything is on sale!

Neil says, "Even if they avoid the mistake of moving their current investments to cash, many investors stop making additional investments when the market drops. Anyone that's not finished building their nest egg should love market downturns and the opportunity to invest in solid companies at discount prices."

Just to reiterate downturns can be buying opportunities for long-term investments, but markets can always go lower before they rebound. So, avoid using leveraged investments or margin accounts to try to make quick profits from the volatility. 

Think long-term when adding to your portfolio.100% of the time over the long term, the market has gone up!

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