Stock Market Volatility Pushed Lots of Investors to Trade Impulsively: Study

Money; Getty Images
Money; Getty Images

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More than a third of investors said they made impulsive decisions because of heightened volatility in the stock market in 2022. But that’s exactly what experts say not to do — instead, investors are supposed to stick to their plan and fight the urge to react to market fluctuations.

What the study says

A portion of investors within every age group — and 37% of investors overall — said they made impulsive investing decisions due to volatility in stocks last year, according to new survey data from SoFi. But younger investors were significantly more likely to do so. It’s understandable, given that 2022 was by some measures the most volatile year for stocks since 2008.

Here’s how the 1,000 investors SoFi surveyed reacted:

  • 29% said they bought a lot of investments

  • 17% said they sold a lot of investments

  • 55% did not buy or sell

What experts say

Reacting to big swings in the market can actually hurt your portfolio over the long run. It’s far better to stay the course.

  • “Ironically, during a period of extreme volatility is exactly when you need the discipline and structure of some investment plan,” Joel Mittelman, president of Mittelman Wealth Management in Andover, Massachusetts, previously told Money. “Unfortunately, that’s often when people throw the plan in the garbage.”

  • Sticking to your plan means you won’t miss out on the eventual recovery, and you won’t have to decide when to reinvest.

Keep in mind

There’s one reason that volatility might prompt you to change your investment strategy, and that’s if the big price swings throw your portfolio allocations out of whack. In that case, it’s a good idea to rebalance on a regular schedule.

The bottom line

A volatile market can be scary, but it’s important to keep an eye on your long-term investing plan. Everyday investors are notoriously unsuccessful at predicting market outcomes, and keeping your money invested is often the best way to maximize returns over the long term.

More from Money:

Don’t Panic: 7 Expert Tips for Managing Stock Market Volatility

7 Best Online Stock Trading Platforms

5 Common Mistakes Investors Make When Markets Are Volatile

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