Stock Prices May Be Declining, But Resist These Temptations at All Costs
If you've checked your portfolio in 2022, you know that this year has been rough for stocks. Across the board, some of the best companies and most-followed indexes have seen their stock prices drop well into the 20% to 60% range, wiping away many of the gains they saw during the mid-2020/2021 bull market. Even though stock prices are declining, you'll want to resist these temptations at all costs.
It's easy to see your investments dropping and want to sell them before they continue to drop, but that's usually not the best approach. Volatility and bear markets in the stock market are inevitable; they've always happened, and you can bet they will continue to happen in the future. If you understand this as an investor, you can prevent yourself from panicking when it happens. If you're focused on the long term -- which you should be -- and time is on your side, you have to be comfortable riding out the storm.
Panic-selling can also add insult to injury by triggering a tax bill. If you've held an investment for less than a year, you'll pay your regular income tax rate on any capital gains. If you've held it for more than a year, you'll get a special capital gains rate, but it's taxes and money owed nonetheless. You don't want to find yourself selling because prices are dropping and then owing taxes on top of that.
Source Fool.com
