Markets work. They will inevitably go up and down. When they are turbulent, markets may seem irrational and out of control. Especially during these times it is important to remember that volatility is simply the byproduct of millions of participants pricing recent information into the value of securities. They can’t all agree and competition eventually drives prices to their fair value.
Focusing On What You Can Control Can Lead to a Better Investment Experience
Since investors can’t control market outcomes, they should instead focus only on the factors that they can control: creating an investment plan; structuring a portfolio that is based on risk capacity and risk tolerance; using diversification to maximize portfolio efficiency; minimizing turnover and expenses; and managing emotions when markets go up and down.