No matter if you have just started saving for your future or you are preparing for retirement, market volatility is an issue that can make investors fearful. The important thing to remember, however, is that it is often a normal part of the stock market cycle.
Fortunately, there are many things a person can do to mitigate their fears about this issue.
Tip #1: Work with an experienced advisor
In a volatile market, a financial advisor can offer an objective perspective when your own emotional ties to your money are telling you to panic. Hiring a financial advisor who has experienced multiple market cycles can help counsel you to make the wisest decisions about your money. During our 35 years of business at Cuba Financial Group, we have essentially seen it all. We have helped clients navigate nearly a dozen periods of real market volatility, recessions, bear markets — you name it. Advisors who have been through multiple periods of market uncertainty during their service to clients offer a unique perspective that is invaluable to getting through those challenging times.
Tip #2: Have a financial plan in place
When the stock market becomes volatile or an unforeseen circumstance in your own personal life arises, having a financial plan in place helps provide the security to make it through without falling into a financial emergency. Creating this plan with a financial advisor can provide you with the confidence to alleviate the discomfort of uncertainty. A financial plan can help you remember your long-term goals and stay the course when the going gets tough.
Tip #3: Make sure your appetite for Risk is properly assessed
It would be great to achieve 100 percent of the upside of the market with no downside risk; however, this is unrealistic. It’s true: with investment, there is risk involved — but also potential return. During periods of high market volatility, it is important to pause and reassess your expectations, remembering why you are investing in the first place. This will help you realistically evaluate how much you are willing to risk in order to make your end goals reality. Historically, investing has provided long-term rewards, and staying the course is often the best plan of action.
#4: Live within a budget
We can’t stress it enough: make a budget, and then stick to it. When you and your family’s daily needs are covered, weathering through stock market volatility is put into perspective and more easily seen as a natural part of investing. It makes riding out the downturns to reap the rewards of good markets much more manageable.
The important thing to remember is that periods of high volatility don’t last forever. Historically, free markets have always prevailed.