By Craig Erwin, Ph.D.
War in Ukraine has begun, the type of war that used to be quite common in Europe, but has largely vanished during the past 80 years. The consequences for those directly involved will be dire, with much bloodshed, sacrifice, and deprivation for the Ukrainians. Although we will complain that we suffer greatly, compared to the Ukrainians, we have it good. We may have to cope with soaring prices, slower growth, higher interest rates, cyberattacks, and wild stock market gyrations, but at least we are not in danger of losing our homes, families, and lives.
There is no turning back; the war has begun. How should your investing approach change during a war? It shouldn’t change. Although you may panic, sell all of your investments, and hide money under the mattress, in the long run that is likely to hurt, not help. What you need to do is keep your cool, resist the urge to act impulsively, and avoid taking actions that can’t be reversed. There is a big risk that, if you react to the news of war, you will overreact. Although it’s best to do nothing, if you feel like you must do something, at least please don’t sell all of your investments, quit your job, and bury your head in the sand, and, for God’s sake, don’t stop saving and investing. Many will sell all of their investments and hold only cash until the war ends, waiting till the storm passes to return to the stock market. But, if you wait for the storm to pass, you may miss out on the biggest returns. And many who sit on the sidelines never return to the stock market because there always seem to be always abundant reasons not to. Perhaps stocks appear too expensive or there is too much uncertainty. But, no one knows if the stock market will get cheaper or more expensive and there is always an abundance of uncertainty. If the stock market collapses, no one knows when it will rebound, so you are best off buying regularly (e.g., every paycheck) and holding forever. Keep saving and investing, even during wartime!
Are you very worried about the war? Since war broke out, how has your investing approach changed, if at all? Are you worried about the ways in which the war will affect you? If so, which ways?
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