Investing while in a volatile market can be scary. But, with the right strategies and proper perspective, it’s possible for your investments to survive — and even thrive — during a volatile market. Here’s how:
Don’t pay too much attention to the news
Yes, as a responsible investor, you need to keep up with the latest developments in the economy and stock market, but it’s also important to know when to ignore the headlines and doomsday predictions that can dominate news cycles. The market will fall and rebound many times over the life of your investments, so there’s no need to get all worked up every time your investments take a dip.
Clarify your investment strategy
Use this opportunity to ensure you have a solid investment strategy in place. Review your time horizon, your investment goals and your tolerance for risk. Then, if they’ve changed much since you last evaluated it. If they have, consider making the necessary adjustments to your investments to have them better reflect your desired strategy.
Diversify
Diversification is a crucial strategy for managing risk in any market, but it’s especially important during times of volatility. By spreading your investments across many asset classes, industries and geographic regions, you can reduce the impact of any single investment’s poor performance on your portfolio.
Keep cash reserves
Cash allows you to cover short-term needs without having to sell investments at a loss. Also, having cash on hand can position you to take advantage of buying opportunities while asset prices are depressed. Of course, a cash reserve doesn’t have to mean a lump under the mattress. Instead, keep your emergency fund in a credit union account you can access at any time. With deposits of up to $250,000 insured by the NCUA [and privately insured up to $xxx], your money is safe regardless of the state of the market.
Regularly review and rebalance your portfolio
During a volatile market, the value of different assets in your portfolio may change, leading to an unintended shift in your asset allocation. Regularly reviewing and rebalancing your portfolio ensures it stays aligned with your risk tolerance and investment goals.
A volatile market is no reason to panic. Use this guide to help your investments survive, and even thrive, in an unstable market.