It’s natural to be nervous when the markets head for negative territory. Keep a positive perspective with these six investing reminders. It can be very unsettling for investors when their portfolios and the markets start heading for the red and fear sets in that all you’ve worked for and set aside for retirement and other goals could be at risk. Here are six investing basics to keep in mind during volatile times:
Periods of volatility are normal – All markets move in cycles and periods of steep contraction are completely normal. While the length of market contractions varies, periods of growth and expansion are usually waiting on the other side. Since 1973, stocks have fallen more than 10 percent and subsequently rebounded eight times.
Don’t Panic – Letting emotions dictate your investing strategy is a risk you should not take. Short-term decisions can have long-term consequences on your portfolio. Being patient can pay dividends.
Know your portfolio – Understand your investments and how specific investments represent different goals and outcomes. Keep in mind your risk tolerance and investment timeline, and if either has changed, consider talking to your financial advisor about rebalancing your portfolio. Diversification can potentially help balance risk during a downturn and mitigate extreme swings in value.
Stay the Course – Remember your financial plan and long-term goals and stick to them. A disciplined investment approach is the best strategy for handling market downturns and will likely enable you to participate when the markets rebound.
Consider opportunities – Working with your financial advisor, determine whether periods of volatility are a good time to take advantage of investment opportunities in line with your long-term plan.
You’re not alone – Your financial advisor is available to help you when you need it. He or she can guide you through difficult markets and be the independent voice and “information bodyguard” that helps you stay focused on your long-term goals.
From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.
The foregoing article contains general legal information only and is not intended to convey legal advice. For legal advice regarding estate planning, the reader should contact his/her lawyer.
Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.