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Why Investing Might Feel Counterintuitive Right Now

| September 15, 2022

You love a discount at your favorite retail store. Whether it’s a skirt or a piece of furniture, 15% off makes it more tempting. But when it comes to investing, that same 15% discount makes you feel like you might be throwing away money.

Many investors tend to sell off stocks when the market is in a downturn and buy up more investments when the stock market is growing. Yet, would you do the same thing when buying a car or even a pair of shoes?

If You’re Feeling Unsteady, You’re Not Alone

In 2022, when there has been plenty of reason to appreciate a discounted investing environment, only one in four Americans say that it’s a good time to invest, according to a recent survey. And 65% say they are holding onto their money, rather than investing it, until the market calms down a bit. They are afraid of losing their money.

Inflation is also causing some uneasiness. Eighty-two percent of Americans surveyed said that they worry about inflation affecting their purchasing abilities in the next six months and 66% worry that a recession is just about to hit.

Investing When Stocks Are Low

For some investors, they understand that it could be a good idea to step up investing when stock prices are low, but they tend to wait too long, hoping to recognize when the market has hit the bottom.

The problem? In order to enjoy long-term gains, you need to be invested on the market’s best days. And those best days tend to come shortly after the worst days.

For instance, according to J.P. Morgan’s analysis, a 20-year period ending on December 31, 2021, the S&P 500 provided an annualized return of 9.52%. Pretty nice! But when you remove the 10 best days out of those 20 years and your return drops to 5.33%.

You never know when the market’s worst day is going to hit, but if you aren’t already invested, you’re probably not going to hit that good day following the drop.

Be Consistent

It’s not fun for anyone when they open up their portfolio and see losses, but if you’re investing for the long term, it’s an opportunity to buy more stocks at a discount and potentially enjoy watching them grow.

When you take a disciplined approach to investing, choosing well-managed companies, you’ll still experience drops in value, but you’ll also likely see growth over the long term.

If you’re struggling with the counterintuitive feel of investing during a market downturn, make an appointment with us at Heritage Investments. We can help you shape an investment strategy designed to protect and grow your wealth over time.