Stock market volatility creates a lot of emotions for investors. Sudden stock market changes or stock markets swinging in extreme directions can make investors feel anxious and confused. This is a natural reaction because the future seems uncertain and the news is filled with negative headlines.
Instead of panicking and immediately changing an investment strategy, we find it’s important to keep perspective and focus on the long-term financial goals.
When stock market volatility happens, our investment advisor team recommends these 5 financial strategies to help investors sail smoother.
5 Tips to Deal with a Rocky Market
#1 Maintain Your Original Financial Investment Strategy
Every investor has to deal with different emotions when investing in the stock market. You should work with your investment advisor and trust into the financial plan you both created together when you hear about the dooming and glooming stock market on the news.
Focus on keeping emotions in check and remember that long-term investments produce solid returns over 20-30 year periods, no matter how the stock market seem to be today.
#2 Be Active about Risk Management
Are you a young employee or baby boomer waiting to retire in 5 years? Are you already a retiree? Each investor has his or her own risk tolerance. During a stock market volatility, you want to maintain an active approach no matter if your risk tolerance is high or low. Having a risk tolerance assessment or investment portfolio in place can help to feel comfortable with the financial investment strategy you created with your investment advisor.
#3 Have an Investment Policy Statement in Place
You want to have an Investment Policy Statement (IPS) in place to stay on track with your investments. An IPS is a document drafted between you and your financial advisor that outlines general rules for meeting your investment objectives. It includes criteria for monitoring performance, addressing risk, and communication between you and your advisor. An IPS also explains when you should rebalance your financial portfolio.
What to Do During a Stock Market Volatility When You Don’t Have an IPS in Place
If investors don’t have an IPS in place, they could be leaving their investments to speculation.
Make sure you have an IPS with written objectives and guidelines to avoid that your investments are subject to the whims of your emotions, and how you “feel” you should be investing.
#4 Maintain a Diversified Financial Investment Portfolio
Do you want to stay protected when a stock market volatility happens?
Create and maintain a diversified financial investment portfolio with your investment advisor. It should include a variety of large, medium, and small cap domestic and foreign investments in different industries and investment styles.
#5 Don’t Count on So Called Financial Experts in the Media
Do you ever get sucked into the message of doom and gloom on the financial media? It’s good to remember that nobody has a crystal ball for the future financial markets. The best is to reach out to your trusted investment advisor and to review your current investment strategy together to calm you down.
Historically, investors who stay focused on their financial investment strategy and disregard the stock market volatility typically reap the financial returns later on. But for this to happen, each investor needs a personalized investment strategy in place.
Are you concerned about the recent stock market volatility but your financial advisor didn’t contact you?
Give our experienced financial expert team a call to schedule your complimentary second opinion. We are happy to review your current investment strategy or any other financial documents together to help you decide if any changes are necessary.
- Assessing Your Risk Tolerance https://www.investor.gov/research-before-you-invest/research/assessing-your-risk-tolerance
- 5 Investing Do’s and Don’ts To Deal With Stock Market Volatility byLynnette Khalfani-Cox – https://www.ebony.com/career-finance/5-investing-dos-and-donts-to-deal-with-stock-market-volatility/