When your investment program was established, you answered questions that helped determine how much risk you were able to tolerate. You had to imagine how you would react to a significant loss in portfolio value. But imagination isn’t needed when reality hits – just take yourself back to the COVID-19 fallout of March 2020. Major stock markets tumbled by 30 percent or more and investors had to contend with portfolio values plummeting. In the midst of the market downturn, how did your reaction compare to what you had expected?
MORE ANXIOUS THAN EXPECTED
If your stress level skyrocketed as the markets fell and you literally had trouble sleeping at night, you may need a more conservative portfolio. Such a move may also involve a look at your financial objectives or the amount you save and invest, but it’s a consideration worth exploring. Your investments shouldn’t cause you great anxiety.
REACTED AS ANTICIPATED
No investor is expected to remain perfectly calm when markets are plummeting. But if you stayed reasonably even-keeled, you’re likely fine keeping your portfolio as it is. Even-keeled would mean you looked at your portfolio with a long-term view, didn’t have the urge to sell while your portfolio value was dropping and felt comfortable to continue making regular contributions.
LESS ANXIOUS THAN EXPECTED
Investors who took the market downturn well in stride, surprising themselves, don’t typically adjust their portfolio as a result. However, some investors who had downplayed equities out of an abundance of caution might be ready to increase the proportion of equities in their portfolio. This may especially be the case if they have lived through market downturns before and experienced the recoveries. If you ever find yourself reacting differently to market swings, please talk to us. We’ll help make sure your portfolio remains aligned with your tolerance to risk.