4 Tips to Help you with Stock Market Volatility

Today It's really important to keep financial markets in perspective.

Market cycles play out against a backdrop of economic, social and political events, and many commentators can't resist trying to assess causes to every hiccup in the market. It's often impossible to explain market activity until long after the dust has settled. That's why it's a good idea to take day-to-day market events in stride and stay focused on your long-term objectives.

If you read the business section of the newspaper or watch financial television shows, you'll hear talk of bull and bear markets, market corrections, and everything else. As an investor, you should be aware of what these terms mean, but you should also know that it may not make sense to change your investment approach based solely on today's headlines.

The markets are unpredictable.

From December 31st, 1986 through December 31st, 2019, the monthly performance of the S&P 500 range from a high of 13% in January 1987 to a low. (Minus 21% in one month of October 1987). Despite the long term ups and downs of this 33 year period, the S&P 500 index averaged 8.85% annual return. That's a solid performance for investors focused on the long term and that's close to the average for stocks over the entire history of the stock market.

But the fact is, many people don't get these returns because their behavior, the emotions drive their decision making and they miss the long-term trends.

So here are 4 tips for dealing with market volatility:

One of the most common mistakes investors makes during bull markets is to move money into quote winding investments in hopes of hitting it big during market bear markets. When the markets are down, investors sometimes lose patience and sell the investments that are declining in value. Unfortunately, investors seldom get this timing right and react too late to capitalize on gains or avoid major losses.

Tip #1) Maintain your balance.

Hold on to the mix of stocks and fixed income.

That are tailored to your objectives, to your time horizon and your risk tolerance and your personal financial situation.

Tip # 2) Continue investing regularly.

Keep making regular contributions to your investment accounts, your employer sponsored retirement plan, your IRA and other investments regardless of whether the markets are up or down.

This is called dollar cost averaging and it works.

Tip # 3) Make changes gradually.

If you need to adjust your portfolio, and sometimes you do, work with your financial advisor to do so gradually.

You can shift and you can rebalance, and there are times that you need to make changes.

Tip #4) Tune out the noise.

These days, an amazing amount of financial news and information bombards investors. Ignore all that noise and keep your focus on a long-term goal.

I know this is not easy to do, but it's vital to long-term success in dealing with market volatility.

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