Often, investors don’t need to do anything.
A holder of a share in a hospitality company at the time of the Covid-19 outbreak could have sold their shares for a low price. However, many of those shares, which had once been worth so little, have recovered their value.
With this example, we have the benefit of hindsight, but as a rule of thumb it’s best not to react impulsively to market volatility. Long-term investment is about averages. Riding out a series of volatile events in the stock market is more likely to yield overall growth in a diversified investment portfolio than reacting to every positive or negative fluctuation.
Timing the market can be incredibly complicated, with even the most seasoned investors getting it wrong. Attempting to sell stocks high, to re-enter the market when they are low, may well produce lower returns than riding out the fluctuations by keeping your investments in place.
It’s important that long-term investors are able to take their emotion out of the situation and focus on the long-term goals, rather than the current market fluctuations.