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How Can Investors Resist The Urge To Sell Stocks In A Volatile Market? Experts Explain

  • By Jenna Gleespen
  • Oct 03, 2022
How Can Investors Resist The Urge To Sell Stocks In A Volatile Market

It is no secret that the stock market has been extremely volatile lately. But, how can investors resist the urge to sell stocks in a volatile market? We spoke to a few experts to find out just that! 

Diversifying is Key

Kevin Martin from WealthPursuits explains: 

How Can Investors Resist The Urge To Sell Stocks In A Volatile Market?

“1. Don’t Check Your Accounts – Seriously, just don’t check them. There’s no reason for long-term investors to check their accounts daily or weekly. Wait for the storm to pass. You will enjoy peace of mind.

2. Look at a Long-Term Stock Chart (50+ Years) – The market always goes up in the long run, but it drops quite a bit along the way. These drops are noise within the context of a long-term investing strategy.

Think the 2022 market drop is bad? Pull up a 50-year chart of the S&P 500. It’s nothing. If you are invested for the long-term, focus on the long-term and ignore the short-term noise.

3. Ignore the Talking Heads – When the market enters shaky waters, investors tend to look for guidance from the “pros.” Here’s an insider secret – the pros don’t know where the market is going either. The narrative in the news is generally short-sighted.

I remember Goldman Sachs changing their S&P outlook half a dozen times throughout 2020. It went from gloomy to gloomier to optimistic to predictions for all-time highs. Looking for guidance?

Don’t. Stick to your plan and filter out the noise. It’s similar to reading the news. The world’s much darker if you read the news daily. Ignore it, and you can focus on what really matters.

4. Spread the Risk – I see market drops as buying opportunities. Everyone is always waiting for the big drop to buy in, and when it comes, they are too scared to act. Use this time to build your portfolio and make any adjustments.

Get better averages on your current holdings, buy into stocks you thought were overvalued before, invest in new asset classes or industries, etc.

5. Diversify – I like fast cash. In the past, when the market is bullish, I would sell too quickly and leave a lot of profits on the table. I was able to combat this by spreading my capital across a broader range of stocks.

I now hold over 150 stocks which means micro-management is not an option. It’s too tedious. I just let them do their thing and dollar cost average along the way. If you panic during market volatility, your portfolio MAY be too focused.

It’s a lot more stressful to stare at a $30,000 loss on one stock than it is to look at $1,000 losses on 30 stocks.

Maybe it’s just me, but expanding my portfolio has helped me combat micromanagement.”

How can investors resist the urge to sell stocks in a volatile market?

A Long-Term Investing Plan is a Must

 Sam Boughedda from AskTraders.com says: 

“I believe the urge to sell stocks in a volatile market will come down to three factors such as your belief in that company, your confidence in your research, and your long-term investing plan.

If you have confidence in all three of these factors regarding each stock you hold, then it should provide a solid foundation and confidence to see out market downturns or periods of volatility.

Your belief in the company will come from the product/service it offers and the demand for that product/service, as well as the company’s management’s ability to drive growth. Your research will be vital in determining how you assess that company.

If you are confident in your research and have covered all bases, it will give you confidence in the company’s long-term future.

Finally, as an investor, you should have a plan for all scenarios, which should cover how you respond in periods of market volatility. Then, always stick to that plan and resist reacting in the heat of the moment.”

How can investors resist the urge to sell stocks in a volatile market?

Get Expert Help When Needed

William Capece, CFP and Director of Business Development at JS Benefit Group, says:

“Hiring an expert to hold your hand through volatile markets typically helps. Short of that, investors simply need to look at the history of the stock market in this country. Over time, it always goes up.

The trick to resisting the urge to sell is building a proper asset allocation that smooths the bumpy ride of 100% equities. In addition, only invest what you can afford to not touch.

The typical recession only lasts a few years so having an emergency fund to fall back on is paramount. An emergency fund allows investors to keep the portfolio invested for it to rebound. Also, the saying ‘no man is an island is so true.

In times of market turmoil, everyone is experiencing the same volatility. Join investing groups, listen to podcasts, and read articles. All these outlets will serve to provide clarity in the short term and hopefully strength to avoid costly mistakes like selling at the wrong time.”

How can investors resist the urge to sell stocks in a volatile market?

Take Advantage of Market Fluctuations

Michael Ryan, the owner of Michael Ryan Money, says: 

  • First, investors should remember that the market is always fluctuating and that there will be ups and downs. It is important to stay disciplined and not make any rash decisions. 
  • Second, investors should diversify their portfolios to help mitigate risk. This means investing in a variety of assets, including stocks, bonds, and cash. 
  • Take advantage of an extreme market fluctuation by taking that time to rebalance your portfolio. This allows you to sell certain investments at a high, and reallocate to investments at a low.
  • Lastly, investors should avoid making any major changes to their portfolios during times when they are emotional, such as when there is market turmoil. Doing so could have a negative impact on their long-term goals. 

How can investors resist the urge to sell stocks in a volatile market?

Know What Your Investment Goals Are

Harry Turner, the founder of The Sovereign Investor, explains: 

How Can Investors Resist The Urge To Sell Stocks In A Volatile Market?

“One way to resist the urge to sell is to have a clear investment plan. This means knowing what your goals are and how you plan to achieve them. When the markets get volatile, it can be helpful to remind yourself of your goals and why you’re investing in the first place. 

Also, it’s important to remember that markets go up and down all the time, and even though there may be some volatility currently, this doesn’t mean that the market won’t rebound at some point in the future. This can help you stay focused on the long term and resist the temptation to sell when prices start dropping.

Another way to deal with volatility is to diversify your portfolio. This means not putting all of your eggs in one basket, so to speak. By investing in a variety of different assets, you will be less likely to have too much money invested in any one particular asset that may drop in value during a market downturn.”

Do Your Research

 Paw Vej, a COO at Financer.com, tells us: 

How Can Investors Resist The Urge To Sell Stocks In A Volatile Market?

“It can be tough to resist the urge to sell stocks when markets are volatile, but there are several things you can do to help mitigate the risk and ensure your investments remain safe.

1. Do your research – Before you make any stock-market decisions, make sure to do your own research.

This means reading industry reports, studying company financials, and doing your own analysis of the market conditions. This will help you make informed decisions about whether or not to sell your stocks.

2. Diversify – When markets are volatile, it’s easy for stocks to lose value quickly. Instead of investing all of your money in one company or sector, try to diversify your holdings by investing in a number of different companies. This will help reduce the risk of any one stock losing all of its value.

3. Stay calm – It’s easy to get caught up in the hype and sentiment of the market, but remember that it’s important to stay calm and rational when making decisions about stock sales. Don’t let emotions get in the way of making sound investment choices.

4. Have a plan – Finally, always have a plan for selling stocks if you decide that it’s time. This will help you stay organized and minimize any potential stress associated with the process.”

Research Will Help You Make Confident Decisions

Mark Chen, the owner of Bill Smart, says: 

“Investors can resist the urge to sell stocks in a volatile market by doing all their research and having confidence that their thesis will play out. Review all the available information and do your channel checks to decide whether the reason you went into a stock in the first place is still valid.

Another way more hands-off investors and resist selling in a topsy turvy environment is having an investment plan and sticking to it. This plan could be contributing to your index fund allocation every month and selling only on a quarterly or yearly basis when you need to rebalance.”

How can investors resist the urge to sell stocks in a volatile market?

Understand Market Circumstances

Tiffany Payne, Marketing Manager at Loanx, explains:

How can investors resist the urge to sell stocks in a volatile market

“Be aware of market circumstances while placing orders if you must trade in turbulent markets. Traders should use caution during the session’s early and concluding hours when prices are most volatile.

Scaling in or out of positions by buying or selling shares in increments as the price moves is an option for trading more small amounts.

Stop orders and stop-limit orders are two defensive tools you might use to safeguard an unrealized profit or reduce the possible loss of an existing position. These can help you make better decisions in the heat of a moment, rather than relying on your instincts.”

Manage Your Risk Tolerance

Daniel Carter, Debt Advisor at IVA Advice, tells us:

how can investors resist the urge to sell stocks in a volatile market

“Risk appetite is your monetary ability to accept a loss, whereas risk tolerance is your capacity to emotionally tolerate significant price changes. Market declines may serve as a reminder to reevaluate your risk tolerance, but I advise delaying until you are calm.

However, risk tolerance can—and ought to—be taken into account at any moment. Do you have enough money to accomplish short-term objectives? The ideal place to put money that you’ll need soon or that you can’t afford to lose is in reasonably stable assets like investment funds, Treasury bills, or certificates of deposit (CDs).

When the stock markets are volatile, having your next year’s worth of living costs in a bank account or money market fund, together with another few years’ worths in bonds that mature when you need the money, can help retirees maintain their composure.”

Learn to Balance Your Investments

Patti Naiser, a finance professional and the owner of Senior Home Transitions, says:

“The urge to sell is always very high when the markets become volatile. Everybody wants to protect their money and always consider pulling out when prices drop. But selling at this point ensures that they take losses while holding on still gives them a chance to overturn. 

Investors should look toward other investment avenues to diversify their portfolios when the market is volatile. If one channel isn’t performing well right now, they can invest in another to ensure their losses aren’t absolute.

Rebalancing their portfolio is also a good option. These tactics will distract them from their volatile stocks long enough for the market to recover.”

Alex Williams, Certified Financial Planner, and the CFO of FindThisBest, explains:

volatile market

“Investors can resist the urge to sell stocks in a volatile market by reviewing their risk tolerance. It’s the ability to emotionally handle huge changes in price and recover from them subsequently. When the market is in slumps, investors are highly discouraged and oftentimes make drastic decisions.

I would advise them to stay calm and wait for the market to settle. In such instances, it would be best to hire a financial advisor who can help you guide you through uncharted territories.

You can closely work with such individuals and make informed investments as the stocks would be available at cheaper rates. I recommend diversifying your portfolio so that when the market is in a slump, your losses can be minimized.

A financial advisor would help you understand the pattern of stock price and make you understand why it wouldn’t be a good idea to sell them in a volatile market.”

Final Words: How Can Investors Resist the Urge to Sell Stocks in a Volatile Market?

There are quite a few ways our experts suggest testing the urge to sell stocks in a volatile market. Most of them agree that research and diversification are essential. And remember, it is always advised to speak with a qualified financial advisor before making any decisions that could affect your wealth. 

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Jenna Gleespen is a published author and copywriter specializing in personal and investment finance. Her expertise is in financial product reviews and stock market education.