Periods of volatility in the market can be unsettling for investors. A dip in the market can spark anxiety, fuel uncertainty, and trigger radical decisions in even the most seasoned investors. But panic isn’t a strategy. It’s important to keep perspective when markets get choppy. Here are three strategies to consider when volatility strikes.
Stay Diversified.
Diversification provides a strong defense against market volatility. By diversifying your
holdings across a variety of asset types, including stocks, bonds, real estate, commodities, and cash equivalents you can reduce the risks involved with any one investment. Your portfolio's resilience is further increased by diversifying within asset classes by making investments in various sectors and geographical locations. Although a well-diversified portfolio may not outperform the top asset classes in any given year, over time, it may be one of the most effective ways to realize your long-term goals.
Stay Invested.
Short-term losses can be unsettling, but letting emotions drive your investment decisions
may prove costly. Selling your investments when markets appear to be in crisis mode may feel like the right thing to do. However, decades’ worth of market data show that staying invested through volatile times has been a smart route to take to pursue long-term financial goals. For instance, a recent Putnam Investment study titled, “Staying invested so you don’t miss the market’s best days” demonstrates that $10,000 invested in the S&P 500 from 12/31/07-12/31/22, a fifteen-year period, would have had an annualized total return of 8.81%. The same study indicates that the annualized total return dropped to 3.29% if the best 10 days were missed during that same period.1 The bottom line is that time in the market generally beats timing of the market.
Stay plan centric.
Avoid acting on impulse or emotion by keeping a long-term perspective despite the
ups and downs of market volatility. Otherwise, the results of investments might be harmed by the knee-jerk reactions that are frequently brought on by short-term market changes. While it's inevitable to avoid them, you may lessen the effects of brief market turmoil by keeping an eye on the wider picture, by sticking to your plan, and by coordinating your investment choices with your long-term objectives. It is also important to remind yourself that successful investing is a marathon, not a sprint, and those who persevere reap the rewards.
At R&R Financial Advisors, we help small business owners navigate the ups and downs of volatility in the market by helping them stay diversified, invested, and plan centric.
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Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor. BWA and Brookstone Capital Management, LLC are affiliated companies. BWA and R&R Financial Advisors, LLC are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents.
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