Some would say that volatility is here to stay following the COVID-19 pandemic. And others would even go as far as to say we are embarking on the next recession. Whether your beliefs align with the former, the latter or none of the above, chances are you feel uneasy. You are not alone.
It could be difficult to witness your investments fluctuate and take some serious downturns. Your retirement investments and future sources of income may be going up in value one day and plummeting the next. As history shows, there has always been a certain amount of volatility in the market; however that may be true, that is no strategy that can guarantee positive returns or preserve an uptick.
Over the last few weeks, have you found yourself asking yourself or your advisor, “should I be moving my retirement assets?” But moving your retirement assets may not be the right solution for you even with the current state of the market.
Volatility isn’t for the faint of heart. With the right tools and information, you can have a financial plan built strong enough to face and endure volatility. Here’s how you can prepare for uncertain times and a volatile market:
Stick with a plan that you can live with even through market ups and downs.
When you are first outlining your financial goals and ideal retirement, it should have accounted for a certain level of volatility. These long-term and larger plans should have built-in micro and short-term plans that will be especially helpful during roller-coaster moments such as these. Pick investments that align with your timeline, goals, and current financial situation, and you’ll want to stick by despite any volatility.
Diversify your investments.
The key is to invest in a mixture of mutual funds. The reason for this is that by investing in stocks, bonds and more, your risk may be lower since you’re not overexposed to one investment category. Your investments can reach global markets because they often move and their own market cycles, and are different than what you would experience in your home market. If you see too much of one investment type in your portfolio, consider spreading that out for diversification. While it doesn’t guarantee a profit, it can help reduce the effects of volatility over time.
Invest regularly. Investing should continue through the market’s ups and downs. Simple steps to make investing a routine include having your 401K contributions deducted from your paycheck or allocating a portion of your paycheck to your IRA. These strategies can’t guarantee a profit or withstand a downturn, but if there is a market decline, you will have the opportunity to invest when prices are low.
Don’t be afraid of a down market.
Instead of fearing a market drop, use it as an opportunity to invest. Some of the larger, more profitable companies that you may not have in your portfolio yet could be at a lower price for a brief moment. You should take advantage of the dip. If you are hesitant or have questions, work with your financial planner for there guidance.
Talk with your financial advisor.
Haste and emotion can make you take quick financial actions without consulting your advisor. These rapid-fire decisions could be detrimental to your portfolio and financial future. Your advisor can help analyze the market, the current standing of your portfolio, and other financial factors. Assessing your risk tolerance will steer any future financial plan changes that will not only protect your investments as much as possible but also give you peace of mind.
Volatile markets are difficult to navigate, especially for those approaching retirement. Although it can be uneasy, there are opportunities out there, even when the market takes a dip.
If you’re feeling unsettled about the level of volatility, or have questions about the market and your financial future schedule a virtual meeting with one of our advisors.