The traditional advice is to hold on to investments during turbulent times, but a new MagnifyMoney survey finds that some investors are going against the experts. Due to the current events of the past year, nearly 40% of investors say they have pulled money from the stock market, with many regretting their knee-jerk reaction.
- 70% of Americans say world news and current events factor into their financial decisions.
- 63% of consumers cited inflation as one of the top current events that impacted their financial decisions and 51% cited the coronavirus pandemic.
- Across Americans who said current events impact their financial decisions, 46% focused on building up emergency savings.
The survey found that younger investors are more likely to pull money from the stock market, with 67% of Gen Z investors and 57% of millennial investors doing so. However, if these investors are in it for the long haul, they possess one of the most valuable assets, time.
“Time is the ultimate weapon when it comes to investing,” says Matt Schulz, Chief Credit Analyst at LendingTree. “It gives younger investors a huge advantage over their older counterparts. Unfortunately, however, Gen Z and millennials risk squandering that advantage if they pull their money out of the market when times get tough. Their best move is to stay focused on the future, leave their money in the market, ride the wave and trust that better times are ahead because history has shown that when it comes to the stock market, they almost always are.”
Not waiting it out could be why a large number of young investors are more likely to have regrets. Approximately 45% of Millennial investors who withdrew from the market wish they hadn’t, along with 39% of Gen Z investors.
While a portion of Americans pulled out of the stock market due to current events, many shifted their focus to saving for emergencies. Looking back on the turbulent past year, the survey shows that more Americans are seeing the value in building up their emergency funds. In fact, among those who said current events affect their money decisions, focusing on emergency savings was the top priority for nearly half (46%) of them.
Four tips for investing in the stock market during turbulent times:
- Avoid checking your investments: If you are in it for the long haul, don’t check your investments on a daily basis. Watching them too closely could tempt you to sell.
- Step away from the news: It is easy to get stressed out by bad news by consuming it throughout the day. However you consume news, don’t forget to take a break and unplug.
- Focus on the future: Stocks go up and down all the time, but in the long run, they tend to trend upwards. Most portfolios have plenty of time to recover from downturns.
- Invest more: Consider buying a few more shares of your favorite index fund or company while their prices are low so that you can reap the rewards when they trend up again.
The full report is available here.
MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,050 U.S. consumers, April 15-20, 2022. The survey was administered using a non-probability-based sample, and quotas were used to ensure the sample base represented the overall population. All responses were reviewed by researchers for quality control.