When you invest your money, it's easy to get excited and start checking it every day to see how much it's earning. This isn't the best idea and it can hurt you in the long run. The best and hardest thing to do with your investments is nothing.
Once I finally paid off my debt and generally got my financial life in order, I was ready to start investing. Everything I read told me to check out index funds, so I did. Sure enough, they're pretty awesome tool with a handful of advantages for new and seasoned investors.
As personal finance writer Chris Reining explains, the financial markets are incredibly hard to predict, even for seasoned veterans. It's easy to look at a decline over a period of days or even months as a plunge that you'll never come back from. However, this is rarely the case for a properly diversified portfolio. The most critical part of investing, then, is not to panic:
Over the short term you don't always make money investing though. That's why it can feel scary. I lost a lot during the recession. In nine months my portfolio went from $175,000 to $120,000 and I was thinking, "I should have sold everything when I had the chance."
But I knew that over the long term the market always goes up. So as delusional as it felt I kept on investing and looking back it's hard to spot where the recession was.
Sitting back and doing nothing while your portfolio loses value can be tough, but you don't actually lose that money until you sell your investments. Sit tight and wait out the storm and your investments will usually go back up. Especially if you've invested in a solid index or ETF fund. That's not to say that there's never a good time to sell, but if you're worried, talk to a financial adviser, rather than reading the daily stock ticker.
The Mistake People Make When Investing [Chris Reining]