Don’t get distracted by headlines
News about earnings reports, economic trends, interest rates, political upheaval and more can send the stock market spinning. You may be tempted to react by making big moves with your investments. However, 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.
Consider your timeline
Day-to-day volatility isn’t a major concern when you’re planning to invest your money for years or decades. If you take the long view, you have time to ride out the ups and downs and take advantage of the market rallies that typically follow market declines. On the other hand, if you’re planning to retire in the near future, you may need to take a more conservative approach.
Diversify your portfolio
A well-balanced portfolio divided among asset classes such as stocks, bonds and cash may also help you manage volatility, regardless of what the market is doing. When you diversify your investments, you’re putting eggs in multiple baskets and spreading out the risk.1
Use dollar-cost averaging
With a systematic investing plan such as dollar-cost averaging, you commit a fixed amount of money to an investment at regular intervals. There’s no need to time the market, and you actually take advantage of the market’s highs and lows because you buy fewer shares when prices are high, and more shares when prices are low.2 Making contributions to a retirement plan through your employer allows you to do this. You can also set up automatic investing with your individual retirement account (IRA) or brokerage accounts.
Review your investment strategy
It may be helpful to review your risk tolerance and timeline with your Seaside Client Advisor so you can select an investment mix that’s right for you. He or she can also help you rebalance your portfolio regularly to ensure it’s still in alignment with your 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.
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Investing in the stock market can be a wild ride at times. No one knows for sure what will happen next, but knowing how to handle stock market volatility can help you stay on track. The following investing principles can help you manage your investments in changing market conditions: