Things to Remember during Market Volatility
Over the past few months, the markets have seen significant volatility, and the value of your holdings may have fluctuated widely. During times of heightened uncertainty, it's only natural to feel tentative about your investing.
The media generates news 24 hours a day, seven days a week, and the current news cycle is causing many to question their financial well-being. Not to mention, you can also check the markets anywhere at any time from your mobile device. For many investors, this can lead to feelings of insecurity, fear, and self-doubt.
But sticking to a well-thought-out strategy that's designed for the long term and regularly rebalancing, or even saving and adding to an account, may help cushion the emotional impact of some of these market swings. If losses are offset, even partly by new investments, the bottom-line number on your statement may not be quite so discouraging.
A fundamental truth of investing is to buy low and sell high. Buying during a down market (buy low) may help enhance your portfolio's growth when the market turns up again. Remember, history has shown that every market recovery has rewarded the patient investor, with a well-diversified portfolio and solid strategy, that stuck to their plan during volatile market swings.
Of course, sticking to an investment strategy or adding new money to the market means you have the financial discipline and mental fortitude to continue. That means continuing to make purchases when things seem bleak and short-term market swings make others question investing - periods like this.
Having a well-diversified portfolio will most likely help. As King Solomon reminds us in Ecclesiastes 11:2, "Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land." Different kinds of investments have different types of risks and rewards – some go up while others go down, to only then often reverse. Some offer more stability, while others may provide more growth.
Design a strategy of various asset classes (different kinds of investments) that tend to have dissimilar price movements in varying economic environments. Your allocation should be based on your personal goals and tolerance for risk. Doing so can help you balance the trade-offs between risk and return, helping you manage the risks of investing and stick to your strategy when it matters most. - If you're unsure how much risk is right for you, talk your financial advisor or here's a Charles Schwab podcast on how you might determine your risk tolerance.
THE KEY: don't let short-term anxiety make you forget your long-term plan (stick to your investment strategy). Historically, long-term investors who have stuck to their plans have been rewarded. That's often what a good financial advisor is there for; to not only help you design and maintain your investment strategy. But to walk with you through times like these and answer any questions you may have.
If we can help you confidently invest for your future, call us today.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful. Past performance is no indication of future results.