Many investors are familiar with the emotional impact that often comes with market volatility. When stock markets swing in extreme directions or change suddenly, investors can feel anxious and make decisions based on emotion that can damage their long-term financial stability. This is a natural reaction when the markets are volatile, especially when the future seems uncertain and negative news headlines are abundant.
Rather than panicking and immediately changing your investment strategy, it’s important to keep perspective and maintain your focus on the long-term. When stock market volatility increases, we recommend these strategies, among others, to help you maintain a disciplined approach to your investment portfolio.
Don’t Panic and Maintain Your Original Investment Strategy
Investing in the stock markets can produce a variety of emotions for any investor. When all you hear on the news is doom and gloom, the best thing you can do is be in communication with your financial advisor and stick to the thoughtful plan you created together. Also, in order to keep emotions in check, remind yourself about the benefits of why you are invested in the first place. For example, long-term investments produce solid returns over 20–30 year periods, despite experiencing market volatility at certain points during that time frame.
Keep an Active Approach When It Comes to Risk Management
Depending on age, personality, short-term, and long-term financial goals, each investor has their own risk tolerance. Whether you have a high or low tolerance for risk, be mindful of how you feel and use that to relate back to your investment approach. If you become temporarily uncomfortable with your investment strategy be sure to have a discussion with your advisor before making any rash decisions.
Maintain a Diversified Portfolio
It’s been said that the only free lunch when it comes to investing is diversification. We believe there is truth to that statement so therefore be sure to maintain a diversified, global portfolio. A properly diversified portfolio should include a variety of large, mid, and small cap stock investments, as well as a suitable allocation to different segments of the bond market.
Don’t Rely on the Financial Media
When emotions are running high, it is easy to get sucked into the financial media’s message of doom and gloom, with so-called “experts” inciting fear and panic. Remember, no one has a crystal ball when it comes to the future of the markets, and even scrutinizing past events cannot fully dictate the market’s future. Take some time to review your current strategy and don’t focus too much on the “noise” that the media creates.
If you’re concerned about recent volatility or haven’t heard from your financial advisor in a while then feel free to contact us to schedule a complimentary second opinion review. We are happy to review your current investment portfolio and provide our thoughts.
Sensenig Capital Advisors can be reached by phone at 610-584-9700 or email at [email protected]
