Navigating Stock Market Volatility

6 Takeaways from the Market’s Wild Ride

The unpredictability of the stock market in recent months has been unsettling (to put it mildly) for investors watching their retirement plan and brokerage account balances go up, down and sideways. The stock market drop in March – the steepest market decline since the 1987 crash – was fueled by fears about coronavirus and its impact on global economies. Investor confidence may continue to waver with uncertainty surrounding the U.S. presidential election in 2020 and fears of a recession.

In times like this, investors often feel compelled to make decisions based on fear, but doing so can actually make matters worse. Stock markets have reacted strongly to outbreaks of SARS, Ebola virus and pandemic flu in the past, and every stock market downturn since 1929 has been followed by a recovery.

Here are six takeaways to help keep things in perspective:

  1. Find opportunity in adversity. When the value of your portfolio plunges as it did for many this year, it can send a shudder down your spine. But you can take a deep breath and remind yourself that a stock market swoon means that stocks are on sale. You’re probably delighted when you find bargains on the clearance rack. Apply that same outlook to your investments.
  2. Keep a long-term perspective. It’s tempting to sell your investments when the stock market is in free fall. However, if you sell when the market is down, you risk missing out on the gains of an upswing. If you don’t need the money in your investment accounts in the near term, you have time on your side and can let it ride for the long term.
  3. Review your risk tolerance. If market fluctuations trigger such an intense emotional reaction that you lose sleep or feel sick with worry, that’s a sign that the level of risk in your portfolio may need to be adjusted. If you’re in retirement or nearing retirement, for example, you may want to reassess your risk tolerance and make some gradual adjustments to your investment mix.
  4. Asset allocation matters. Different asset classes – stocks, bonds and cash equivalents – react to market conditions in different ways. By dividing your investments among the three major asset classes, you can help to manage risk while pursuing attractive returns. The asset allocation you choose should be based on your goals, timeline and risk tolerance.
  5. Stay the course. With systematic investing, also called dollar-cost averaging, you invest a consistent amount of money at regular intervals, no matter what the market does.1 It can take the emotion out of investing and replace it with a measure of discipline. Since you buy more shares when prices are lower and fewer when they’re higher priced, over time, the average price you’ve paid for the shares you own may be lower than the average share price.
  6. Seek professional guidance. Few people have the time or expertise to manage their own investment portfolios to best effect. Consulting with your Seaside Bank and Trust Client Advisor can help set your mind at ease.

1 Systematic investing cannot guarantee a profit or protect against loss in a declining market. Consider your ability to continue investing through periods of low-price levels.

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