Strategies for when the markets become volatile

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Strategies for when the markets become volatile

Financial Planner

If markets get choppy, it pays to have an investing plan and to stick to it.

Keep perspective: Political uncertainty is a constant, and downturns happen frequently. But market setbacks have typically been followed by recoveries.

Stay disciplined: Trying to time the market has proven challenging—and could cost you.

Plan for a variety of markets: An investing approach built with your goals and situation in mind may help you cope with short-term volatility.

Consider help: You may want to look at a professionally managed solution.

Triggers for market volatility can come in many different shapes and sizes—policy uncertainty in Washington or Beijing, earnings reports, geopolitical unrest. And market swings can rattle even seasoned investors’ nerves. But volatility is part and parcel of investing. So put such uncertain times to good use as a motivator to help ensure your investment strategy aligns with your long-term goals, timeline and stomach for risk.

Instead of being worried by volatility, be prepared. A well-defined investing plan tailored to your goals and financial situation can help you be ready for the normal ups and downs of the market, and to take advantage of opportunities as they arise.

Here’s how.

Keep perspective—downturns are normal and normally short lived

Market downturns may be upsetting, but history shows that the U.S. stock market has been able to recover from declines and can still provide investors with positive long-term returns. In fact, over the past 35 years, the market has experienced an average drop of 14% from high to low during each calendar year, but still had a positive annual return more than 80% of the time.

Be comfortable with your investments

If you are nervous when the market goes down, you may not be in the right investments. Your time horizon, goals, and tolerance for risk are key factors in helping to ensure that you have an investing strategy that works for you.

Do not try to time the market

Attempting to move in and out of the market can be costly.

Invest regularly, despite volatility

If you invest regularly over months, years, and decades, short-term downturns will not have much of an impact on your ultimate performance. Instead of trying to judge when to buy and sell based on market conditions, if you take a disciplined approach of making investments weekly, monthly, or quarterly, you will avoid the perils of market timing.

Take advantage of opportunities

There may be a few actions that you can take while the markets are down, to help put you in a better position for the long term. For instance, if you have investments you are looking to sell, a downturn may provide the opportunity for tax-loss harvesting—when you sell an investment and realize a loss. That could help your tax planning.

The bottom line

Rather than focusing on the turbulence, wondering whether you need to do something now or wondering what the market will do tomorrow, it makes more sense to focus on developing and maintaining a sound investing plan. A good plan will help you ride out the peaks and valleys of the market and may help you achieve your financial goals.

To read more about each of these key important strategies and the rest of this insightful article by Fidelity Investments, CLICK HERE.

As always if you have questions or would like to discuss building or reviewing your financial plan please contact Harry Perler or David Olejnik.