Strategies for Investors in a Volatile Market

Julia Carlson |

During volatile times, many investors get nervous and begin to question their fundamental investment decisions and choices. This is especially true for those investors who monitor their portfolios daily. They can be tempted to pull out of the market and wait on the sidelines until it seems safe to dive back in. It is helpful to understand that equity market volatility is part of the investment experience and therefore, is inevitable. Equity markets always move up and down, especially over the short-term. Some suggest that the only certainties in life are death, taxes and market volatility.

Trying to time the market is extremely difficult and rarely beneficial. A better alternative is to understand your personal situation. Make your investment decisions less emotional by planning your equity investments for the long-term and ignore short-term fluctuations. If you have a long-term investment horizon for your equity holdings of at least five years, chances are the current volatility will pass - possibly in a couple of weeks or months, but rarely longer than a couple of years.

Markets may continue to rise but they also could head lower. At the end of the day, investors should always put their primary focus on their personal goals and objectives.  In times of crisis, many people tend to overreact and sometimes do not make the best decisions. Remember panic is not a plan. 

When equity markets experience unnerving fluctuations, I suggest you ask yourself three questions:

  1. Have my financial timelines changed?
  2. Have my financial goals changed?
  3. Has my risk tolerance changed?

If you answered “YES” to any of these questions, then it is wise to discuss these changes with a qualified financial advisor.

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

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