Brace yourself: Your investment portfolio is likely about to experience a dip.
It’s a pattern that has historically plagued the month of April, CNBC reports. Just don’t freak out and make any rash decisions that could jeopardize your retirement nest egg.
Citing data from data analytics firm Kensho, CNBC’s Trader Talk blog explains:
“The start of the second quarter usually begins with a flat to slightly down market for the first two weeks. It’s a well-known phenomenon …”
For example, since 2000, the Standard & Poor’s 500 stock market index has been down by an average of 0.2 percent in the first two weeks of April. Tax Day is a turning point, though, with the S&P up by an average of 1.7 percent in the two weeks after Tax Day.
“That’s a swing of almost 2 percent in the S&P, on average — significant for a two-week period.”
Two possible explanations:
- Investors withdrawing money to pay taxes.
- Corporate earnings reporting season beginning around April 15, with banking and industrial companies usually reporting during the latter half of April.
Avoid stock market panic
Explanations for this pattern are arguably beside the point, however. The key take-away here is to not let every little market fluctuation prompt you to panic. Fluctuation is an inherent part of financial markets, after all.
If you’re investing for the long haul and your investments are appropriately diversified, you should have no reason to worry. So set emotions aside.
As we explain in “11 Tips for Sane, Successful Stock Investing,” reacting emotionally to stock market ups and downs is a rookie investor mistake. For example, if you pulled out of stocks after the 2008 crash, you may have missed the historic gains from the recent bull market.
This is why Money Talks News founder Stacy Johnson’s first rule of investing is to invest only long-term money. By “long-term money,” he means money you won’t need for a long time — at least five years, if not 10.
He explains further in “Ask Stacy: How Do I Invest in the Stock Market?“:
“When it comes to stocks, the longer your investment horizon, the lower the risk. Day trading, holding stocks for very short amounts of time, is exceedingly risky because nobody knows what’s going to happen at any given hour or day. Investing over decades carries far less risk because quality companies become more valuable over time and so do their shares.”
To gain a better understanding of your own investment horizon, check out “5 Simple Ways to Invest Your Retirement Savings.”
What helps you keep your emotions from derailing investments? Share your tips with us below or on our Facebook page.