WHY YOU SHOULD AVOID EMOTIONAL INVESTING

^{By Louis Green, CFA®, CFP®, CRPS®}

Emotional Investing

Selling in market declines for emotional reasons can often times be a mistake. Market returns can be unpredictable.

As highlighted in the chart below, the S&P 500 returned 7.67% on average from 6/30/99 to 6/30/24. However, an investor in the S&P 500 who missed only the best 10 days in those 25 years had a return of 4.36% on average per year. Missing fifty of those best days produced a negative return of -2.30% on average per year. Think of the tradeoff between experiencing short-term market volatility and missing potential returns. Consider constructing a goals-based portfolio that will keep you invested during volatile times, rather than trying to avoid every market decline.  

The Effect of Missing the Best Market Days Over the Last 25 Years ¹⁸

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^{18 YCharts. The Effect of Missing the Best Market Days Over the Last 25 Years. [July 2nd, 2024]}