By Bryan Trugman, CFPⓇ
You don’t have to be a 24-hour news hound to know the investment sector is enduring a period of market volatility. If you’ve checked in with your brokerage account in the last few weeks, you’ve probably noticed significant peaks and valleys in your portfolio balances.
While the situation may feel ominous, the truth is that we’ve been here before and come out the other side. Although some historical events have permanently reshaped the American economy, they have not dismantled it.
If you have a strong financial plan in place, you don’t need to make too many changes to your investment approach. Here are some reliable lines of action for navigating the fluctuations of investment market volatility.
1. Keep Long-Term Portfolio Health in Mind
Your investment portfolio should already be constructed with long-term goals and perspectives in mind—which the vast majority of regular investors do instead of focusing on short-term gains.
Diversification is the biggest key to mitigating risk during market volatility. Blending a variety of growth-oriented stocks with more stabilizing bonds and cash is a common way investors reduce the effect of short-term losses.
With investing, staying committed to a plan is far more important than reacting to temporary market swings. A disciplined investor is far more likely to withstand times of market volatility by concentrating on the bigger picture and future goals.
2. Look for Opportunities
No one relishes a market downturn. However, market volatility can present some unexpected opportunities for stability and even profit. Active money managers use market pullbacks to find fundamentally sound companies at a lower cost.
This isn’t a matter of timing the market to beat an oncoming crash. It’s about staying the course and sticking to your diversified investment allocation to reap the benefits as markets bounce back. In fact, if you’re contributing to an employer sponsored 401(k) plan, you’re implementing a dollar-cost averaging strategy that helps reduce the impact of market fluctuations by spreading out buying the market over time, lowering the risk of buying at high prices.
As of the latest data, the S&P 500 has entered correction territory, experiencing a decline of approximately 10.1% from its recent all-time high. The average maximum downturn in a positive year has been 11% over nine weeks. Roughly every 365 days, the stock market undergoes a 10% drawdown. This means despite the tumult, this volatility is nothing unusual. In fact, it’s normal and even healthy!
Granted, the second Trump administration has been more unpredictable than the first. But we can expect more leveling out as the administration finds its footing.
3. Keep Your Emergency Fund Intact
Every long-term investor should set up an emergency fund. But it’s even more important to do so during times of market volatility.
When emergencies happen, this fund serves as a buffer for unexpected expenses. If you need major auto repairs or home maintenance, an emergency fund can save you from shedding investments at a discount to pay for them.
Financial professionals recommend keeping an emergency fund with at least three to six months of living expenses. It can assist you with short-term disruptions while your portfolio stays oriented toward long-term goals.
4. Stay Disciplined
Markets rise and fall, and companies come and go. But the overall marketplace has remained intact, overcoming occasional downturns and getting back on track every time.
Some of the worst days in the market are followed by some of the strongest. Investors who don’t panic or dodge in and out stand to gain from those recoveries. Discipline may be tricky to maintain, but it rewards.
Stay Grounded During Market Volatility
Volatility and risk are both parts of investing. With a strong investment strategy in place, temporary losses won’t derail your overall financial health. Instead, you have a solid foundation that can allow profits to turn in the future.
Attitude Financial Advisors can help you stay grounded when market volatility hits. Reach out to me via email at btrugman@attitudefinancial.com or give me a call at (516) 762-7603 to set up a free consultation.
About Bryan
Bryan Trugman is managing partner, co-founder, and a CERTIFIED FINANCIAL PLANNER® practitioner at Attitude Financial Advisors. With more than 17 years of experience, Bryan specializes in addressing the financial needs of new parents as they seek to realign their finances, assisting divorced individuals as they navigate an unforeseen fork in the road, and strategizing with those seeking to accrue a dependable retirement nest egg. Bryan is known for being a good listener and building strong relationships with his clients so he can help them develop a customized financial plan based on what’s important to them. He is passionate about helping his clients experience financial confidence so they can worry less and play more. Bryan has a bachelor’s degree in industrial and systems engineering with a minor in mathematics from State University of New York at Binghamton. He has served on the board of the Financial Planning Association and continues to be actively involved in the national organization. He is also a member of the Plainview-Old Bethpage Chamber of Commerce and has served as its vice president and as a board member. When he’s not working, you can find Bryan on the ballroom dance floor or engaged in a fast-paced game of doubles on the tennis court. To learn more about Bryan, connect with him on LinkedIn. Or, watch his latest webinar on: How Much Is Enough? A Surprisingly Simple Way to Calculate Your Retirement Savings Needs.
