Sometimes all it takes is a tweet. In the case of the Dow Jones Industrial Average falling back to a level it had not seen since January this week, and a two-day drop of more than 500 points between Monday and Tuesday, it was President Trump's Sunday surprise on Twitter that more tariffs might be slapped on China.
For first-time investors, just getting started can seem like a daunting task. Add in a market that is experiencing a lot of volatility, and it can make decisions even more agonizing. Day-to-day fluctuations in the market are often influenced by outside forces, like the U.S.-China trade dispute, or other points of uncertainty, for example, Federal Reserve interest rate policy.
The stock market had its best first quarter performance since 1998 this year as a trade deal with China seemed near (it may still be). The stock market had a disastrous fourth quarter of 2018 as the Fed's decision to raise rates spooked investors. But it was the Fed's decision to hold the line on rates early this year that has been seen as a primary contributor to the market's record rebound.
That is why it is important to remain calm and avoid making rash decisions. Instead, stay focused on your long-term goals. This includes maintaining a diversified portfolio so no single investment overly affects your bottom line.
Though tempting, do not compare your returns to a single index or to other investors for that matter. Their goals are likely to be different than yours, as no one invests exactly the same way.
Research has shown that the most successful long-term investors remain patient during swings in the market. Your financial plan is only as good as your ability to see the eventual payoff. Staying the course could mean reaching your financial goals sooner than expected, and with a lot less stress.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
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