4 Principles of Investing in a Volatile Market

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Volatile markets can easily make you unsure about your investments. The truth is, market volatility is normal and should be expected. This doesn’t mean it will be easy to stay calm during drastic market changes. However, here are a few tips to help you keep your cool during difficult times.

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1. Create a Personal Financial Plan

A sound financial plan should be made up of your short and long-term goals. HSBC retirement studies show people with financial plans accumulated nearly two-and-a-half times more in retirement savings than individuals without a plan.

However, knowing that you need a financial plan doesn’t mean you know how to make an effective financial plan. Fidelity Investments offers some help with this issue. They encourage people to consider the following when creating a financial plan.

  • Your timetable – How many years away from retirement are you?
  • Your goals – Decide what you plan to do in retirement, acquire enough savings to have the income you need, etc.
  • Your risk tolerance – What is the current situation of your savings, income and debt and how will a turn in the market impact each?

 

Accessing topics like these can help you create a personal financial plan that fits your needs and prepares you to enjoy your future.

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2. Don’t Attempt to Time the Market

There is no formula to time market upturns and downturns.

An article by Betterment states research shows holding on to your money in an attempt to time the market is associated with massive opportunity cost if it prevents you from benefiting off of the extra time it could be in the market. An article by Financial Advisor explains this is because a few strong, unpredictable, trading days here and there are when most market gains occur. So, if you’re going to benefit from these unpredictable days, you need to be in the market for the long haul through the ups and downs to catch the strong gains.

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3. Diversify Your Investments

One way to remain calm in a volatile market is to reduce the level of risk in the first place by diversifying your investments.

Investing in one company or institution is more subject to large losses in a volatile market. On top of that, an article published by Nerdwallet points out that it puts your income, investment portfolio, benefits, and retirement accounts at the mercy of how well that company or institution performs in the market.

Diversifying your investments across a few different class types of long and short-term investments like stocks, bonds and cash is a way to help offset risks. Some take it further suggesting further investment diversification inside each of these classes.

While diversification potentially reduces an investors’ level of risk, it does not guarantee profits or that losses will not occur.

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4. The Hands-Off Approach

One way to ease the stress of managing investments in a volatile market is to use a financial advisor like Ken Fortuna.

As a financial advisor, Ken helps guide clients through financial planning, investments and managing risks. Ken’s goal is to make it simple and straightforward to identify and plan for your financial goals. His advice and ideas can help you navigate through the opportunity and the risks associated with each decision you make.

Many opportunities and problems can be avoided by proactively approaching your financial situation with the help of someone that knows the in and outs and the up and downs of investing. Ken can help you gain a better understanding of the financial concepts behind insurance, investing, retirement, estate planning, and wealth preservation.

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This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. 


My goal is to make it simple and straightforward to identify and plan for your financial goals. Call, click or stop by my office today and allow me to help guide you through financial planning, investments and managing risk.

Ken Fortuna, M.B.A.
Financial Advisor at Waddell & Reed, Inc.

Address: 1575 Dewar Drive – Suite 450, Rock Springs, WY 82901
Phone: 307-382-2944
Website: kenfortuna.wrfa.com

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