So many factors affect the markets today—from federal monetary policy to corporate scandals to geopolitical uncertainties—all can make for market volatility. How do you maintain your investment groove in volatile environments? Though no one has all the answers, there are some things investors can do to help keep their financial goals on track:
Trust Your Investment Professional
He or she does the day-to-day research and is most familiar with your portfolio and individual goals. Your investment professional can help ensure that your portfolio is properly diversified and determine if any changes are needed. He or she can be a great source of guidance.
Keep Investing Small Amounts
Though your confidence in the markets may be shaken, you don't have to stop investing all together and potentially jeopardize your long-term goals. A good compromise can be an automatic investment plan for continued contributions. Start small if you need to—invest a set amount of money each month by setting up systematic withdrawals from your bank account. Over time, these smaller investments can really add up. One tried-and-true method of periodic investing is dollar cost averaging. This strategy can be an effective way to purchase shares over the long term at a lower average price (e.g. buying more shares when prices are low and less shares when prices are high).1
Diversify, Diversify, Diversify
You hear it all the time and it couldn't be more appropriate during volatile markets. Your investment professional can help you build a portfolio that includes mutual funds, as well as individual stocks and bonds or other securities, and within those investments can be many different asset classes. In other words, the types of securities—equity, income, international, tax-efficient, and sometimes a combination of those classes—should be broadly diversified to help you weather any kind of market.2
Don't Fixate On the Short Term
Do your best not to get preoccupied with short-term volatility, especially if you are investing for a long-term goal. The longer you hold your portfolio, the less volatility may affect it, and the potential for returns may be greater. So, file those account statements for now and save them for future market upturns to see how far you've come!
Take Advantage of This Type of Market
The silver lining in a down market is the many buying opportunities for investors. Buying while prices are low may allow you to reap the rewards later.
These are just some ideas to help you stay on course with your financial goals. It never hurts to review investment basics and time-tested strategies that could benefit your financial planning efforts.