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Avoid These: 4 Investing Mistakes in Times of Volatility

June 29, 2020

Often, the hardest part of investing is the one we have the most control over – our emotions. Ups and downs in the market, as in life, are normal. It's your reaction to them that will make the difference in your strategy. Here are some common investing mistakes – and how you can avoid them.

Trying to time the market.

To time the market successfully, you have to know when to get out and when to get back in. Getting one right is tough. Getting both right? Nearly impossible. But, if you don't stay fully invested in the market, you may miss out on the best days.

Source: Ned Davis Research, Edward Jones calculations. 1/1/1980-12/31/2019 These calculations assume the best days, as defined as the top percentage gains for the S&P 500, including dividends, for the time period designated. These calculations do not include any commissions or transaction fees that an investor may have incurred. If these fees were included, it would have a negative impact on the return. The S&P 500 is an unmanaged index and is not available for direct investment. Past performance is not a guarantee of future results. Dividends can be increased, decreased or eliminated at any point without notice. Dollar values rounded to the nearest $1,000. © 2019 Ned Davis Research, Inc. All rights reserved. Further distribution prohibited without prior permission.

Holding too much in cash.

Cash can serve a valuable role, providing for your spending needs as well as for emergencies. But holding too much in cash can come with risk – the risk of not having enough growth to meet your goals or offset inflation.

Chasing performance.

Letting fear influence your decisions can lead to buying at market peaks and selling at market bottoms. A better strategy is to have a broad asset allocation and remain diversified so you can better weather market gains and losses.

Focusing on the short term.

Don't measure your performance on day-to-day fluctuations. The stock market averages a 10% correction every year, and there have been 32 bear markets and 32 recoveries since 1900. Market declines are normal. The key is to remain focused on your long-term goal, not the bad news of the day.

The best way to avoid all of these?

When you start to feel an emotional reaction to the market, reach out to your financial advisor to review your goals. Your portfolio, and your future self, will thank you.

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