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Planning and Reacting to Market Volatility

Planning and Reacting to Market Volatility

June 2, 2016

Market volatility is as inevitable as death and taxes—and rapid changes in the value of your investments and assets can be scary. But there’s no need to panic. Here are eight strategies for dealing with market volatility.

  1. Have a financial plan that takes your risk tolerance into consideration

When making any financial decisions, your risk tolerance is an essential factor to keep in mind. Reassess your risk tolerance during times of market volatility, as you may discover that your comfort level is higher or lower than you thought it might be during calmer times.   

  1. Determine when you will need your money

Your risk tolerance does not have to be dictated by age, but it should be dictated by when you want to tap into your investments. You may be retiring in several decades, but hoping to access revenue for a new house in a few years. Upcoming expenses should shape your financial plan, so that your money will be ready when you need it.

  1. Diversify your assets

Spreading your money across a variety of types of investments, such as stocks, bonds and cash, will keep you from putting all of your eggs in one basket. It’s also important to diversify geographically. Your risk tolerance and your long-term plans for your money should determine your asset allocation.

  1. Stay invested—don’t try to time the market

Everyone wants to buy low and sell high. But it’s impossible to know definitively when either the high or the low hits. Think long-term and don’t let a dip today make you stray from the strategy you’ve developed.

  1. Don’t invest with your emotions

Panicking and selling because an investment has lost value locks you into a loss. In the financial crisis of 2008-2009, investors who stood firm were able to benefit from the market’s rebound.

  1. Have an emergency fund

Maintaining some of your money in an accessible cash fund may be a lifesaver in an emergency, and may make it easier to weather market volatility. An emergency fund is a comforting reminder that some of your money is still available, even if you never have to resort to it.

  1. Review and balance regularly

Checking in on your financial portfolio and adjusting it regularly will help you maintain your long-term goals. It also lets you adapt and adjust your portfolio in reaction to a volatile market (without needing to restructure entirely), and in reaction to changes in your investment strategy.

  1. Invest with a professional

An expert on your side will not only help your money grow, it will give you peace of mind when the market is volatile. A financial advisor will promote good habits; shield you from potentially uninformed, risky behaviour; and make it clear what strategy and options work for you. For expert mortgage and financial advice, contact SafeBridge today.

Categories: RETIRED


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