If You Panic-Sold During Market Volatility Here’s When To Get Back In

If You Panic-Sold During Market Volatility Here’s When To Get Back In

If you sold stocks in a panic after Russia’s invasion of Ukraine triggered tremendous volatility in the market, you’re not alone, reports an article in CNBC. The S&P 500 fell as much as 2.6% last Thursday before closing 1.5% higher while the Nasdaq Composite tumbled 3.5% and then climbed back up 3.3% in the same day. Those swings caused many investors to sell off assets, and it may be more difficult to get back into the market than they think.

Research from the Massachusetts Institute of Technology (MIT) found that more than 30% of panic sellers don’t reinvest after getting out of the market. That’s troubling, because investors who skip out of the market never to return miss out on the opportunities that a market recovery can bring, the article contends. Often the best returns follow some of the worst dips. Investors who missed out on the S&P 500’s 10-best days each decade since 1930 garnered a total return of 28%. But those who kept their investments throughout the volatility could’ve gotten a 17,715% return. Allowing a wrongly-timed sale to keep you from reinvesting and earning potential gains is the worst thing an investor can do, experts maintain.

However, it’s important for investors to understand why they might have panic-sold, and to determine their risk tolerance. If market swings are just too much for you, consider reallocating to less stock exposure. As for getting back in, it can be difficult for some investors as they don’t want to make the same mistake twice. But waiting for assets to decline again could keep you out of the market for longer, and if you panic-sold because of a current news event—such as the situation in Ukraine—it’s especially important to jump back in in order to take advantage of the recovery. Using the dollar-cost averaging strategy could be a smart way to get back into the market; by investing at set intervals over time, it eliminates some of the emotional reinvestment decisions you might be forced to make with a lump sum investment. You could also combine those two approaches, reinvesting your money at set intervals—say, every 8-10 weeks—and then putting in a higher amount if the market dips during that time.

Regardless of what approach you take, the data is clear: no matter how strong the urge to panic-sell may be, staying invested over time is the best way to grow your money, the article concludes.