Stock market downturns happen. The good news is they are usually followed by a recovery — but that knowledge probably won’t help you sleep any better at night. Stock market ups and downs can be a bumpy ride for even the most seasoned and strong-stomached investors, but it’s possible to weather the storm by falling back on some basic investing principles.
Below are four tips for surviving stock market volatility and, hopefully, sleeping better at night.
Keep a cool head.
Easier said than done, right? Abruptly pulling out of the market or drastically changing your course based on short-term fluctuations can prove costly, as markets tend to rebound after volatile periods. However, if you find you worry too much over the dips and dives of the market, you may want to re-evaluate your investment strategy and devise a plan that better matches your risk tolerance.
Diversify your portfolio.1
Diversifying your assets won’t guarantee you solid gains and no losses, but it helps manage risk and limits the negative impact of a volatile market. First, make sure your assets are allocated in a variety of asset classes, including stocks, bonds, cash, real estate, etc. Then, diversify your assets within those categories. For example, you may want to divide your stock investments among large-cap, mid-cap and small-cap stocks.
Stay the course.
Whatever your course may be, as long as you have a solid investment plan that you’re comfortable with, don’t make rash changes or try to time the market. Continue investing a set amount every week or month.2 Focus on creating and maintaining a solid investment plan that meets your long-term goals and ignore the rest. To help ease the pressure of managing your investments during a difficult market, you may want to enlist the help of a professional.
Silence the talking heads.
This may mean turning off the news, ignoring your Uncle Willy’s unsolicited stock tips and tuning out the online chatter. Anyone who tells you they know exactly what the market is going to do should probably be ignored, and that includes the so-called “experts” on your TV or computer screen.
Finally, perhaps the best advice to be given on how to handle stock market volatility is to ask for help when you need it. At the very least, it will give you peace of mind that you are on a track that’s right for you. Contact your Seaside Client Advisor if you have any questions, concerns or just want reassurance you are on the right course for your specific financial goals.
1 Diversification cannot guarantee a profit or protect against loss in a declining market.
2 Dollar-cost averaging (systematic investing) cannot guarantee a profit or protect against loss in a declining market. You should consider your ability to continue investing during periods of low price levels.
Not federally insured
Not a deposit of this institution
May lose value