Volatile Markets Have You Worried? Keep a Long-Term Perspective

April 15, 2016

perspectiveThe stock market's volatility can be unsettling for investors. On good days, it is easy to have an upbeat perspective. However, when the market takes a dip, those who are dependent on their investments for income often start worrying.

When the market swings, it is vital to maintain a long-term perspective and stick with your financial plan. Making decisions in the heat of the moment or at the height of emotions could result in losses to your detriment. Here are some tips to help you stay grounded during the ups and downs of Wall Street:

  • Remember that it's all part of the game. Swings in the stock market are normal. If you have been caught off guard by a downturn, not doing anything may be the best thing you can do. This is particularly true for investors who are striving after long-term financial goals.

    Don't let your emotions and initial shock sway you from your original plans. The key to overcoming unpredictable setbacks is to understand that turbulence in the financial markets is to be expected. History shows that over an extended period of time, such occurrences even out.
  • Keep your emotions in check. External noise from news outlets and investor hype could distract you from your financial goals. Learn how to tune out the noise. It may seem counterintuitive, but the more you keep updated on market movements, the more you may feel that your investments are on shaky, unstable ground—even if they're not.

    It will be harder for you to focus on your long-term planning and investments if you allow worry to cloud your judgment. Fixating on the market's fluctuations may do you more harm than good.
  • Go with the flow. It is impossible to predict if the market will rally or decline over a specific period. Good investors are aware that when dealing with the stock market, they will almost inevitably be surprised by fluctuations.

    The key to maintaining a long-term perspective in a volatile market is learning how to adapt and make the necessary adjustments to stay afloat. A well-diversified portfolio can help insulate you from taking big hits when the market drops.*
  • Stick to your original plan. When the market has a downturn, it is crucial for you to stick to your investing principles and avoid getting caught up in the turbulence.Adhering to your long-term plan, especially when it includes a well-diversified portfolio, may be your best bet in riding out a major drop.

    Still, market declines can bring losses for investors. In a volatile market, it is important that you are ready for rebalancing or the buying and selling of certain portions of your portfolio to maintain your desired asset allocation. Talk to your financial advisor for guidance.

Historically, investors have earned a high-risk premium for maintaining their long-term plan throughout market setbacks. Remember that the market's fluctuations and dynamics are normal. If you're concerned about your investments, take the time to consult with your financial advisor to plan the course of action you should take.

* Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794.