Forbes: 13 Investment 'Don'ts' For Periods Of Market Volatility

Originally posted on Forbes.com

1. Don’t buy low-quality stocks.

Market volatility such as we are experiencing this year can often entice investors to buy stocks that have been beaten down and are of low quality in terms of profitability and balance sheet strength. These should be avoided! Market volatility of this kind is an opportunity for investors to upgrade the quality of their investment portfolio by selling troubled investments and buying better quality. - James Demmert, Main Street Research

2. Don’t lose sight of your priorities and goals.

All of us will have both short-term needs and longer-term goals. When reevaluating your investments, be clear on which of these two the investment serves. If you have near-term priorities that require cash, then raise that cash. But once you have covered those, ensure you stay invested for your long-term goals too. - Jonathan Hudacko, Just Invest

3. Don’t let anxiety make the decisions.

Don’t allow fear and anxiety to cloud your decision-making. Investment positions should be long-term bets based on long-term fundamentals. Arguably the most fruitful investing occurs during times of market volatility and uncertainty. Drown out the anxiety and fear and focus on long-term, fundamentally sound investments that can be purchased below their long-term value. - Ryan Swehla, Graceada Partners

4. Don’t panic.

In times of marketing volatility, it is very important to think rationally. There are many factors to consider before making moves within your portfolio. Most market corrections are relatively short-lived, and even in extraordinary times, the market tends to rebound and outperform its previous records. If you hold tight, you can likely recover any losses and even come out better. - Justin Brock, Bobby Brock Insurance

5. Don’t go for penny stocks.

People tend to prefer to buy cheap stocks. They have the idea that they are getting a “better price” or “deal” than when they buy blue-chip stocks like Amazon and Apple. A huge don’t, especially in times of uncertainty, is to invest in no-name stocks. There is a reason why penny stocks are worth cents. Sure, you can hit the lottery from time to time, but the risk-reward ratio is not worth it. - Gabriela Berrospi, Latino Wall Street

6. Don’t stray from your financial plan.

Someone once told me that the only certainties in life are death, taxes and market volatility. As such, it is important to know the value of your investments and stick to your financial plan. Don’t let your emotions take over. Speculative, fear-driven actions often lead to financial consequences. - Robert Reeder, GlassView

7. Don’t wing it.

Most people never get lucky with the market. If you’re really interested in participating in the market during extreme volatility, you should seek the advice of a professional to help you navigate and minimize your mistakes. - Drew Gurley, Redbird Advisors

8. Don’t check your accounts every day.

In times of uncertainty and market volatility, our natural tendency is to want to know the impact on our personal finances. If you know the market is low, checking your balances and seeing them lower will only make this cycle worse and cause you to want to make an emotional decision. Don’t look and know that the market will come back. - Kelly Shores, GCubed, Inc.

9. Don’t ignore the lesson about planning.

The times that we are living in are teaching us an important lesson about planning that we shouldn’t ignore. Don’t wait until a market crash, pandemic or crisis to diversify your portfolio. Whether you do so through your IRA or personal funds, investing in intangible assets like gold, real estate and other alternative investments may help avoid massive losses when the market goes sour. - Jason Craig, IRA Resources, Inc.

10. Don’t act on stale data.

In a rapidly developing environment, a lot of information is stale. Analysts have not yet reduced the EPS forecast to reflect the new reality. Rating agencies take time to lower firms’ credit ratings. Economists are slow to cut the GDP growth forecast while a deep recession appears inevitable. Firms do not cut dividends immediately, and dividend yields may seem abnormally high. Don’t make the same mistake. - Cutler Knupp, The Haskell Company - Dysruptek

11. Don’t ignore the potential risk impact.

If the volatility in your investments makes you highly uncomfortable, it’s time to check in on the level of risk your portfolio carries. Depending on your current financial state and place in life, risk tolerance changes over time. Once the market levels off, look into adjusting your overall portfolio to something you are more comfortable with maintaining. - Jared Weitz, United Capital Source Inc.

12. Don’t sell based on a negative return.

Don’t think with your heart when you view your investment statement. A negative return does not always mean that positions should be sold. In fact, if you had previously developed a clear financial plan and allocated your investments to align with this plan, nothing has truly changed to warrant an allocation change. - Meredith Moore, Artisan Financial Strategies LLC

13. Don’t get too excited about ‘up’ days.

Bear markets can be an excruciating rollercoaster not only because they go down, but also because they come with several relief rallies. This is the time when optimism briefly re-emerges before getting squashed by another leg down. If you want to grow your positions, do so on “down” days and try to refrain from getting too excited about “up” days. Too many buy high and sell low, repeatedly. - Felix Hartmann, Hartmann Capital