On December 31, 2018, the S&P 500 closed down -6.24%. During this time the VIX index, which measures the amount of fear in the market, spiked to over 30 points. For comparison’s sake, the VIX in 2017 was below 12. This amount of emotion in the markets can build irrationality into investor’s decisions, and can negatively impact investment performance results long-term. Morningstar.com reported that “Successful investing is hard, but it doesn’t require a genius…As much as anything else, successful investing requires something perhaps even more rare; the ability to identify and overcome one’s own psychological weaknesses.” Behavioral Finance experts, like Brett Steenbarger, have identified several traps investors unknowingly fall into when emotions run high. Below are the three frequent mistakes investors make during volatile markets.
*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.