In this video from our Getting Started series in which JONATHAN HOLLOW answers the common questions faced by first-time investors, we look at what you should do when markets start to tumble.
TRANSCRIPT
If markets tumble, stick to your plan for a few months before you do anything rash. The worst mistake many investors make is using their emotions to control their investment decisions. And often what happens is when markets tumble, they panic and end up selling their investments when they've already slumped a long way in value. And that's the worst time to sell.
If you've got a good financial plan, you can use it to control your emotions. In our book,
How to Fund the Life You Want, Robin Powell and I devote a whole chapter to this question of how you can successfully manage your emotions when markets are falling all around you.
And we give practical hints and tips. For example, decide what you want to buy or sell. Write it down, put it in an envelope, and then put the envelope away for, say, three months. You open the envelope three months later, you look at your proposed decision and you say to yourself, is it still a good one? Well, if it is, do it because time will have cooled down your emotions.
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