on the crypto
Market volatility is as much a part of the stock market as the stocks themselves. It has always been like this and I am willing to bet my last two quarters that it will always be like this. For investors, the sooner you feel comfortable with volatility, the better, because you learn not to let short-term moves affect your long-term investment strategy and goals.
This is why market volatility should be a secondary thought if you are a long-term investor.
Don't let the declines in the market cause you to panic
Imagine you are an S&P 500 investor and decided to sell your stock at the start of the COVID-19 pandemic when stock prices fell. On March 20, 2020, the S&P was just above $ 2.300. However, as of May 25, 2022, the S&P 500 was hovering around 3.960, even though it had dropped more than 17% over the past year.
The same goes for the Nasdaq Composite Index. During the pandemic, it fell from over 9.731 to just over 6.879, but in May 2022 it is above 11.300, albeit with a decline of more than 28% over the year. Dropping your investments due to market downturns can not only be costly due to potential taxes, it can also detract from future earnings. Panic selling can be expensive.
Time on the market matters
One of the best investment quotes to follow is "time on the market is better than timing on the market". First, it emphasizes the real fact that market timing is virtually impossible to consistently achieve over the long run. Investors may think they can, but it usually takes some time to show them why this thinking is wrong. On the other hand, the quote highlights the huge role that time can play in the capitalization of investments.
Capitalization occurs when money earned from investments starts earning on its own and is largely responsible for how many people acquire their wealth. For capitalization to work its magic, however, it takes time. And to give it to them, you must avoid abandoning your investments - or making decisions that go against your long-term interests - when short-term volatility occurs, no matter how “extreme” it may seem at the time.
Embrace dollar cost brokerage
With the dollar cost averaging, you invest specific amounts at regular intervals, regardless of the stock price at that time. Dollar cost averaging is a great investment strategy because it can take a lot of emotion out of investing, which is especially important in times of high volatility because investors are likely to let emotions influence their investment decisions.
How you prefer to divide your investments is up to you. It can be weekly, biweekly, monthly, quarterly or other. The most important thing is to establish a specific program and stick to it. If you have a set schedule, it's easy to ignore market volatility because it doesn't matter (or at least shouldn't) matter to you.
This is essentially how you want your investment process to work. Ignore short-term market volatility and keep an eye on long-term goals. You'll be glad you did.
