When the stock market turns down it should not be feared, it should be expected. We get disappointed in our investments when we see them lose value, this is completely normal. No one likes to log into their account or open their statement and see the value going down, but if we can train ourselves not to panic or let fear take over, we will become better investors. Here are four ways to prepare for stock market volatility.
- Set realistic expectations upfront. We get disappointed when our expectations are not met. We must realize our investment values will decline about 20% of the time. However, we can get excited about the opportunity it presents, and maybe even take advantage and buy more when it’s lower. This will help us weather the volatility.
- Diversify your investments for your personal risk tolerance. We all have different experiences in life that shape the way we view risk. It is important that you can sleep at night and invest in a way that is reasonable for you.
- Fear not, you haven’t realized the loss unless you sell. Mark Twain said, “History doesn’t repeat itself, but it does often rhyme.” Looking back over history the stock market has recovered 100% of the time. Be patient!
- Maintain your emergency fund. If there is anything this pandemic has taught us, it is critical to keep at least three months up to a year of your living expenses saved in a liquid account, most likely a bank savings account. This allows us to be patient and not having to sell when the markets are down.
Taking advantage of these simple strategies can help you become an empowered investor.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
Email me your questions at financial.freedom@lpl.com or call 541-574-6464. You can also post you question on our Facebook page: https://www.facebook.com/FinancialFreedomWealthManagementGroup
All Investing involves risk including loss of principle. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Past performance does not guarantee future results.
