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Panic Investing – Reactive vs Proactive

The tech-rich Nasdaq climbed over 2% on the weekend after Big Tech companies reported successful quarterly figures. Asia-Pacific markets also rose as the Japanese yen strengthened against the dollar after the BoJ (Bank of Japan) kept interest rates the same. Even Tesla stock made a comeback after Musk’s visit to China.

It is easy to get caught in the giant market yo-yo as big tech companies report favourable quarterly earnings. The buy-and-sell frenzy can take over even the savviest of investors. Investing is a long-term wealth-building solution. Avoid getting caught up in short-term market volatility panic. Panic buying and selling could affect your financial portfolio negatively.

What is reactive investing?

Reactive investing is when investors respond immediately to market volatility with major investment changes. When markets drop, it is normal for investors to want to sell off poorly performing stock and reinvest it elsewhere. This rash investing is often caused by an uncontrollable situation, and being reactive is a way of trying to control the situation.

·       Examples of reactive investing

Investing a large portion of a retirement portfolio in big tech companies and the tech sector. They perform very well and earn fantastic interest. When a market correction or stock sell-off occurs like it has recently, panic investors sell their tech stock at lower prices only to find that weeks later, these tech stocks rebound and continue to perform well. The investor has lost the opportunity to earn higher interest on his already invested tech stock or buy good tech stock at lower prices.

What is proactive investing?

Proactive investing means removing emotion and rash decisions from the equation. It requires research and making informed decisions that will benefit a financial portfolio. Your financial advisor has extensive knowledge of the markets, market history, and funds and will invest with long-term growth in mind and not be swayed by short-term volatility.

·       Examples of proactive investing for long-term wealth-building

Proactive investing involves selecting a diversified portfolio of stocks belonging to well-established companies with excellent track records of showing good returns. When stock prices fall, the investor does not panic and weathers the volatility storm, knowing that the stock will rebound and earn good profits over the long term. If any stock change decisions are made, they are after extensive market research.

Importance of a financial advisor

A financial advisor is an objective and rational third-party expert who will invest on your behalf. They are there to protect your investments and see the bigger picture. They think long-term and are not affected by short-term volatility in the markets.

A financial advisor conducts proper research and analysis before making informed decisions about investing in a fund or stock. What is suitable for one investor is not necessarily ideal for another. They customise an investment strategy according to each investor’s unique financial goals, requirements, and risk portfolio.

Some investors have a portfolio aimed directly at retirement and have long-term funds. Others have a retirement portion and an investing portion that speculates on the stock market. For the one speculating, quick decisions are vital, but they are still based on fact, experience and knowledge and not on news, panic or advice from your uncle’s dentist.

Speaking with a financial advisor before making investment decisions is essential, even when volatile markets can lead to panic and anxiety.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

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