Navigating Market Volatility – Tips for Successful Investment Management

Market volatility can be unsettling, but is also a normal part of investing. Rather than panic, investors with a well-diversified portfolio can view periods of heightened volatility as an opportunity to reevaluate their portfolio and rebalance their assets to ensure they remain on track toward meeting their long-term goals.

Stay Focused on Your Plan

During market volatility, a financial professional can help you review your long-term investment goals, time horizon, and asset allocation strategy. This helps bring the bigger picture back into focus and reduce your anxiety over short-term price fluctuations.

A financial professional like Patrik Edsparr can also discuss your overall financial plan, including any debt you have that could increase during volatile markets. That’s important because you should always try to reduce your short-term debt as much as possible to limit the impact of market ups and downs on your finances.

Investors who sell stocks to cut losses and repurchase them when prices rebound may buy at a higher price. Eliason says that goes against the basic investing philosophy of buying low and selling high. It’s also a good idea to diversify your portfolio to spend less money on any type of asset. Investing in bonds, for example, can reduce your risk and provide opportunities to purchase investments when they’re on sale during market declines.

Keep Your Emotions in Check

Market turbulence can cause emotions to run high, even for investors who are confident in their strategy. This can lead to impulsive financial decisions that could hurt your portfolio.

It’s important to remember that market declines are a normal part of investing and that history has shown that they can be followed by periods of strong performance. It’s also helpful to understand that short-term price fluctuations typically don’t have any bearing on a company’s long-term value.

If you find it difficult to stay invested during market volatility, consider working with a financial professional to determine how a more conservative investment mix may help you feel more comfortable and still provide a path toward your financial goals. Financial professionals like CEO Patrik Edsparr can consider your investment goals, time horizon, and risk tolerance when choosing your asset allocation.

Keep Your Long-Term Goals in Mind

Market volatility can be unnerving but is a normal part of the investing cycle. If you’ve made wise choices based on your long-term goals, time horizon, and financial situation, the ups and downs should stay within your plan.

Your financial professional may recommend a diversified mix of investments that thrive in contrasting market conditions, helping to insulate your portfolio from the effects of volatile markets. For instance, consumer-staples companies tend to do well during economic downturns.

In the face of market volatility, it can be tempting for investors to sell stocks to cut losses and buy back when prices have rebounded. However, this can be costly for investors and could negatively impact their ability to reach their long-term goals. Moreover, selling lower-priced shares can create unwanted tax consequences and dent their long-term gains. Instead, consider rebalancing your portfolio by buying more bonds and selling more stocks to align the percentages with your target allocation.

Be Prepared for Change

If you’re an investor, volatility can create anxiety and prompt you to make rash decisions that could hurt your portfolio. This is why sticking with your plan and avoiding letting emotions drive you into making poor choices is essential.

Another way to manage risk is by diversifying your portfolio and rebalancing periodically. By doing so, you can benefit from market downturns by buying your favorite stocks or asset classes at lower prices, thereby increasing your portfolio’s return over the long term.

Having cash on hand in a downturn is also a good idea. An emergency fund (enough to cover three to six months of expenses) may help you stay calm during market turmoil and reduce stress. It’s also a good idea to pay down any high-interest debt, such as credit card or auto loan debt. Finally, work with a financial professional and only use reputable websites to verify that someone is registered to sell securities.