Volatility came back in a big way during the final quarter of 2018, causing the markets to experience both historic drops and advances.1
Instead of worrying about market volatility, it’s best to expect it and be prepared. Here are some strategies to help your portfolio survive these volatile times:
- Seek professional advice. A qualified financial advisor can help provide access to the products that are suitable for your specific risk tolerance. In addition, they can help rebalance your portfolio periodically to ensure that it isn’t more heavily invested in stocks than you had originally planned. A financial advisor can help return your portfolio to where it should be at the risk level you’re willing to accept.
- Stay disciplined. It’s easy to lose perspective when volatility continues to affect the markets, but it’s best to focus on the numerous opportunities available. In addition, the economy remains healthy. Many economists predict another 10 years of bull market gains, but they fully expect a number of short-term pullbacks.2
- Invest for the long-term. When the markets are volatile, it pays to have an investment plan in place and stick to it. Unless something has changed with your investment time horizon, objectives and risk tolerance, there is no reason to change your investment strategy. Investors who stick with their investment plan and maintain a diversified portfolio are prepared for market shocks.
- Remember, the market moves in cycles. Volatility isn’t unusual. It’s a normal occurrence. Markets may seem random, but there are repeating cycles. They go up, peak and then go down, making down markets a part of that cycle. Investors tend to forget to expect the end of a current market phase, but when one market cycle finishes, the next one will begin.
Perhaps the best strategy of all is to remember that in times of market volatility, it’s important to resist the natural impulse to react emotionally and stay the course.
1 www.wyattresearch.com, Get ready for a volatile 2019, Crowder, Andy, December 23, 2018.
2 www.kiplinger.com, How to prepare for volatility in 2019, Smith, Glen, February 20, 2019.