Staying the course in a volatile market
World events such as high inflation, war, and post-pandemic supply chain issues haven’t just taken a toll on our emotions, this uncertainty has also taken a toll on the market, creating a measure of uncertainty that may be leaving investors worried about their financial future.
It’s in these times that you should lean on your financial advisor the most; after all, we’re here to help and can offer you an objective viewpoint and expert advice. If the recent market volatility has you wondering about how to protect your financial future, here are a few of our top tips:
Stick to the plan.
We almost always recommend making smaller, regular contributions throughout the year rather than lump-sum contributions. This strategy is called “dollar-cost averaging”, and it’s been proven a cost-effective way to invest and one that will help you average a higher ROI over time. Even better, dollar-cost averaging takes the emotion out of investing by building a regular habit that’s not dependent on what’s happening in the market.
Stay focused on your goals.
You’ve probably heard it before, but it bears repeating: “It’s not about timing the market, it’s about time in the market.” It’s natural for market volatility to create some feelings of anxiety. Even though you logically know the goal is to buy low and sell high, uncertain economic times can drive even the most savvy investor to do exactly the opposite. Instead of focusing on the here and now -- look to the future and recommit to your goals.
The key? Diversification.
Investing in different financial instruments, industries, and sectors can help mitigate risk and maximize your potential return on investment. Every sector faces different pressures and reacts differently to world events, so diversifying your portfolio means your investments will be less at risk from any single negative event. There are some sectors that even thrive during a volatile market, so check in with us to explore all of the options available to you.
Take a lesson from history.
The market has faced many downturns, survived wars, inflation, rate hikes, and yes, even a pandemic. The end result? Markets have always recovered (and then some), despite volatility. Here are a few examples:
5. Avoid tuning in daily.
Much of the anxiety investors feel is about seeing the daily ups and downs in the market, trying to find the perfect time to buy and sell based on what they see happening. It’s better to instead implement some of the strategies we’ve talked about, like dollar-cost averaging, and then checking in on your portfolio only on a quarterly basis.
6. Have a conversation.
Instead of worrying, call or email us, and let’s have a conversation about what’s going on. Together, we’ll discuss what it means, and how you can stay on track to meet your goals. Everyone’s circumstances are unique. If you’ve been saving for a goal that’s almost in sight, or, if your financial situation changes for any reason – these are great opportunities to check in with your financial advisor.