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Stock market volatility can cause you
to second-guess your investment decisions, and may tempt you to
“get out” of the market. |
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SHOULD YOU CUT AND RUN? The stock market has been all over the place in recent months. Rising food prices, the subprime mortgage crisis, job losses and the falling dollar have contributed to a less-than-rosy outlook on both Wall Street and Main Street. So it is not surprising that many investors are concerned about their portfolios.
Stock market volatility can cause you to second-guess your investment decisions, and may tempt you to “get out” of the market. It is important to remember that you can’t meet your goals with emotion-based decisions. So although market movements can take a toll on your nerves, the right strategies may give you some peace of mind. (Read accompanying article.)
Staying invested
One way to deal with volatility is to avoid it — this means staying invested and not paying attention to short-term fluctuations. Assuming you have worked with a financial professional, your investment strategy was developed to help you meet your financial goals, so trying to time the market could potentially jeopardize your financial plan — and your future goals.
Investing regularly
It may not seem intuitive, but investing regularly — even during market downturns — can potentially help to reduce your overall costs. Systematic Investing (where clients regularly make payments to their contract) can also ease the anxiety of daily market fluctuations. And, the fixed dollar amounts you are investing buy more shares when prices are falling. (Remember that Systematic Investing neither ensures a profit nor protects against a loss in a declining market. Consider your ability to continue investing during a declining market.)
The big picture
Whether you are a long-term investor or a shorter-term investor close to retirement, it is important to keep a rational perspective. Work closely with your financial professional, try to keep your portfolio mix fairly constant, avoid selling and continue to invest. Then you can stand ready for the next upturn. |
