The ongoing Russo-Ukrainian war has worsened the financial outlook of Americans, prompting a desire to save more and put off investing, according to a survey by MassMutual. But financial experts say staying away from the vagaries of the stock market could be a mistake.
The report found that two-thirds of Americans are concerned that the conflict will hurt their wallets, with nearly half keen to save more money and 42% delaying investments.
“For a year that began with such hope and optimism, many are deeply concerned about the US economy,” said Amanda Wallace, head of insurance operations at MassMutual, noting the stress on day-to-day expenses and financial insecurity.
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It has been a volatile period for the stock market as investors respond to news of war, rising interest rates, and spiraling inflation, among other headlines.
Investment hesitation is common, especially after a “liquidity event,” such as the sale of a company, according to certified financial planner Dennis Morton, founder and director of Morton Brown Family Wealth in Allentown, Pennsylvania. Sometimes the language is ‘I’ll wait for things to calm down’.
But, he said, pausing investments during market turmoil can be costly, because relying on liquidity can mean skipping opportunities to “pitch money” at low prices, often missing the opportunity for recovery.
In fact, higher yields may come on the heels of some of the biggest declines, research by Bank of America shows.
Since 1930, the 10 best performing S&P 500 Index each decade has generated a total return of 28%. However, the company found that continuing to invest resulted in a return of 17,715%.
These results are consistent with JP Morgan’s research, which shows how the best days of the market often track the worst days, and there is a chance of a cost failure to keep investing.
Investing for retirement means a long-term strategy regardless of current market conditions.
Jim naughty
Partner advisor at AdvicePeriod
“When we make a financial plan, we are assuming a certain rate of return over a certain period of time,” Morton said. “And missing a few days, weeks, or months can change that rate of return and really jeopardize the plan.”
Oftentimes, a long-term perspective may help reduce anxiety or the desire to panic sell during stock market volatility, experts say.
“Whether the markets are going up or down, my investment advice remains consistent,” said Jim Shagawat, a CFP advisor and partner at AdvicePeriod in Paramus, New Jersey. “Investing for retirement means a long-term strategy regardless of current market conditions.”
Even with strong financial knowledge or skill, he said, it can be alarming to see a significant decline in the portfolio. But it’s important to avoid emotional investment decisions.
“Let’s find it [asset] A customization you can stick with,” explaining the importance of knowing your risk tolerance and designing a portfolio to match.