4 Things To Do In A Volatile Market
Updated: Oct 2, 2020
By Novi Wealth Partners
No one can deny that we are in the thick of things right now. Between a global pandemic, economic worries, and political uncertainty, it’s no surprise that we are seeing increased market volatility. All of this uncertainty may be causing you to wonder, “How will this affect me?” or “Will my portfolio recover?”
While the severity of these events is not to be minimized, we can battle fear and anxiety by going beyond the headlines and educating ourselves with the facts. With that in mind, here are 4 ways that can help prepare your finances for more volatility.
1. Don’t Panic
When headlines are dramatic, it’s hard not to respond in kind. But remember, news outlets want to catch your attention, which means they are prone to exaggerate information. Instead, keep a clear head by looking at the stats and put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Declines in the Dow Jones Industrial Average are actually fairly regular events. In fact, drops of 10% or more happen about once a year on average.
Sometimes the market fluctuates in reaction to a global or political event, and sometimes it’s just how the market works. The only long-term guarantee in investing is that there will be short-term fluctuations.
2. Look At The Long View
Now that we know to do a little research instead of making desperate moves to potentially save our money, here’s an analogy that will give us perspective as to how the stock market and our investments behave. People’s moods can fluctuate on a day-to-day basis and so can the stock market. However, if you look at someone’s personality over a long period of time, their moods average out and usually improve with maturity. This probably doesn’t apply to everyone you know, but stay with me! In the same way, the stock market is stable over time. The value of your investments also grow and mature with time, even with short-term ups and downs.
Here is a graph that shows this long-term stability, despite short-term market fluctuations. This is the Dow Jones Industrial Average (DJIA) showing over the last 30 years of investment value, which is a fair representation of the market as a whole if you are an average investor.
If you remember the 2008/2009 crash, as seen above, the market recovered really well. Our current situation may seem significantly different from anything in the past, but capitalism and human perseverance will once again prevail and lead to improvement in the markets.
3. Keep Your Hands Off
Based on what we’ve covered so far, what’s going to happen when we ride out the stock market roller coaster and keep investing consistently? We will experience growth, work toward financial confidence, and save ourselves a lot of stress when future downturns come.
When the stock markets go down, you can think of it like a Black Friday or Cyber Monday Sale, where stocks and mutual funds are on sale and you’re getting the best deal on your money. However, if you choose to sell back your funds, or, staying with our example, return a previous purchase you bought for full price, you will get a fraction of your money back. You’ll lose money.
If you consistently invest and don’t take any money out until retirement, you don’t need to worry. Don’t become frantic and start selling back everything you bought for a much higher price. Let it grow and mature.
4. Talk To A Professional About Risk
You can do all the research you want, but ultimately, it’s extremely beneficial to talk with someone who researches this information daily and can help answer concerns specific to your situation and phase of life.
Depending on your age and financial circumstances, you might not feel like you have as much time to let the market bounce back. This is why it is even more important to make sure the types of investments you have align with your risk tolerance and time horizon. Lower-risk funds don’t go up and down as much as some other more aggressive-growth funds. Are you ready to see all your options for ways to help protect your money and setting you up to succeed in any market environment? Call (609) 921-7002 or email firstname.lastname@example.org to get started.
About Novi Wealth Partners
Novi Wealth Partners is an independent, fee-only comprehensive financial planning firm dedicated to empowering clients to discover their definition of true wealth while providing the confidence to achieve it. With 20+ years of experience, we have found that most people don’t care about money, but instead, they care about what money can do for them and their loved ones. As a result, we focus on guiding our clients to find their unique vision for their life and developing a plan to help them live out their values. Our goal is to truly understand our clients on a personal level and help them navigate life’s many changes.
We are located in Princeton, New Jersey and we service clients both locally and nationally. There are four CERTIFIED FINANCIAL PLANNER® practitioners in the firm, all of whom are members of the prestigious National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA). We prioritize a team-based approach, which allows us to deliver comprehensive financial planning, investment management, tax planning advice, retirement planning, estate planning advice, risk management advice, and concierge level wealth management. We are committed to providing each of our clients a level of service as unique as they are and we are proud, as Fee-Only™ financial advisors, to offer unbiased financial expertise. To learn more about Novi Wealth Partners or to get started on your financial journey, visit our website or connect with us on LinkedIn.