You will live through several periods of market volatility during your investing lifetime. These periods are stress inducing and may cause you to second guess your investment strategy or even consider a different approach to managing your money. While the level of volatility we’ve seen during the COVID-19 pandemic is rare, it has exposed flaws in many people’s financial plans that may have been prevented.
Economic downturns can be unsettling but viewing market activity from a wider perspective may ease your nerves. The U.S. stock market moved into a bear market in early March 2020, as investors worried about the ongoing economic impact of the coronavirus pandemic. By March 11, the Standard & Poor’s 500 dropped 9% to close in bear market territory, ending the bull market that began in 2009.
If we widen our gaze further, we’ll see that this is the 9th bear market on record since 1926. Past performance can’t predict future market results, but time has shown educated investors can rebound from bear markets and are always encouraged to stay calm through such disruptions.
PROFESSIONAL PERSPECTIVE
Despite the current market volatility, the best advice may be the simplest: step back, look at the big picture, and avoid hasty decisions.
Your initial reaction to market spikes and sharp drops might be to make a quick exit, but that can be the wrong move. It’s natural to question your investment strategy when the market gets rocky but consider the following tips before making any final decisions.
TURN IT OFF
In today’s world of modern media, there is an opinion on everything. And for every opinion, there’s an opposing view ready to argue it! Between cable network business news, investment websites, newspaper financial pages, and even social media; the surplus of opinions and lack of consensus can be overwhelming.
There is no sense in shuffling through the endless contradicting opinions when the most reliable resource is just as accessible! Your best course of action should be seeking an experienced financial professional who can monitor the market and perform personalized financial analysis.
RESIST THE TEMPTATION AND LOOK AT THE BIG PICTURE
Volatility can play rough with your emotions. You may be tempted to jump ship during a downturn but timing the market’s trendline is nearly impossible. It rarely maintains a steady upward or downward trajectory. Resist the temptation to react in an emotional way to sudden market changes and remember that turbulence is part of the ride. Short-term market fluctuations can stir all sorts of emotions and may even lead you to unwise investment decisions. Instead, whenever possible, step back and look at the long-term.
Are you investing for 10, 20, or 30 years? Longer? Viable investment strategies generally outlast volatility. Past market performance cannot serve as an indicator or predict future trends, but numbers from the past can provide insight.
TAKE A DEEP BREATH
In a nutshell, the stock markets will always go up and down. That is simply their nature. So, what do you do when they are down? Stay calm and take a deep breath. Watching the market too closely – especially when it nosedives or blasts off into space– can produce unwarranted stress or false exuberance. Attempting to find the exit door or entrance ramp on a jittery market is ill-advised, even for the most studied investor. For the sake of your mental well-being, try to find some ways to de-stress, take a break, and relax.
THINK TWICE
On the other hand, a volatile market is no reason to stick your head in the sand and ignore your financial picture altogether. Prudence is key to finding investment success. A flexible investment strategy can allow you to take advantage of appropriate opportunities that may arise if they are suited to your risk tolerance, time horizon, and personal goals. Connecting with your financial professional can help ensure your money is working for you in the long term – regardless of what the markets are doing this week or next.
WHAT’S NEXT?
Some may say the most interesting part of investing is the uncertain future. For all we know, the wildest part of the market ride of 2020 may be behind us or we may face more ups and downs. Regardless of what’s in store, keep in mind that bouncing trendlines are not necessarily indicators of impending doom, nor golden opportunities. Rather, they’re simply a typical part of the investing lifecycle. With a sound strategy in place, movement in the market can be anticipated, not feared.
How resilient is your retirement market plan? It isn’t always easy to tell. At RGA, we plan with several potential outcomes in mind and ensure we have a plan for losses implemented, even in a prosperous market. Does your plan assure you 0% floor of losses? Or are you losing your principal or growth? Interesting in learning more? Let’s discuss strategies! We offer free virtual second-opinion sessions to review your current retirement plan and through an in-depth tax-analysis, risk tolerance, and customized proposals with explanations. Understanding your current position in relation to your goal is crucial in avoiding depilation. Click the link below, call 1-800-467-8152, or email info@ronaldgelok.com
