Tips to Navigate Volatile Markets
When markets get choppy, it pays to have an investing plan and stick to it.
Maintain Perspective: Market Downturns Are Normal
In the past, U.S. stocks typically experience three drops of 5% per year. They also have one drop of 10% per year. Additionally, there is a drop of around 15% every three years. While these downturns can be unsettling, past performance shows that stocks tend to recover and provide long-term growth.
Source: Fidelity Investments. Past performance is no guarantee of future results.
Develop a Sustainable Plan for Market Fluctuations
The combination of stocks, bonds, and short-term investments you choose will influence both your potential returns and the volatility of your portfolio. Select an investment mix that aligns with your goals, timeline, and financial situation, ensuring it is one you can maintain even during market turbulence.
Choose an investment mix you are comfortable with
Data source: Fidelity Investments and Morningstar Inc. 2022 (1926–2022).3 Past performance is no guarantee of future results.
Prioritize Time in the Market Over Timing the Market
Attempting to sell stocks to sidestep downturns can be tempting, but accurately timing the market is challenging. If you sell and remain out of the market during a recovery, catching up can be difficult. Missing just a few of the best market days can greatly hinder your overall performance.
Stock returns represented by the S&P 500® index from January 1,1980–December 31, 2022. Past performance is not a guarantee of future results. Source: Fidelity, Asset Allocation Research Team, Bloomberg as of 12/31/22.
Maintain Consistent Investing, Even During Tough Times
Historically, some of the best opportunities to purchase stocks have arisen during periods of significant market downturns. By investing consistently, you instill the discipline to buy stocks when prices are low. Consider establishing an automatic investment plan to ensure regular contributions.
Investing during recessions has historically led to strong investment results.
For illustrative purposes only. Recession dates from the National Bureau of Economic Research (NBER). Past performance is no guarantee of future results.
Seek Guidance to Navigate a Down Market Effectively
Although losing money is never pleasant, your financial advisor can help you capitalize on a down market. Tax regulations might allow you to use investment losses to offset future tax liabilities or convert to a Roth IRA at a reduced tax cost due to lower share prices. Additionally, down markets present a prime opportunity to consult with your financial advisor about adjusting your investment strategy or seizing low-price opportunities.
Think About a Hands-Off Strategy
If you are concerned about market risk, consider having a professional manage your investments. If you're unsure about your current strategy or feel it needs adjustment, consult a financial advisor.
Bottom Line
Navigating the complexities of the financial markets requires a balanced approach and a long-term perspective. Whether you prefer a hands-on approach or the experience of a financial advisor, having a well-thought-out plan tailored to your goals and risk tolerance is essential. Start planning now to ensure your financial future is secure and resilient against market volatility.
Sources:
https://www.fidelity.com/viewpoints/investing-ideas/six-tips
Disclosures:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
