After losing ground in 2018, U.S. stocks had a banner year in 2019, with the S&P 500 gaining almost 29% — the highest annual increase since 2013.1 It's too early to know how 2020 will turn out, but it's been rocky so far, and you can count on market swings to challenge your patience as an investor. The trend was steadily upward last year, but there were downturns along the way, including a single-day drop of almost 3% on August 14. That plunge began with bad economic news from Germany and … [Read more...]
Coping with Market Volatility: Be Willing to Take Advantage of Market Downturns
“Smart investors are prepared to weather the inevitable rough patches.” Anyone can look good during a bull market. Smart investors are prepared to weather the inevitable rough patches, and even the best aren't successful all the time. When the market goes off the tracks, knowing why you originally made a specific investment can help you evaluate whether those reasons still hold, regardless of what the overall market is doing. If you no longer want to hold an investment, you could take a … [Read more...]
Coping with Market Volatility: Be Sure to Use Appropriate Benchmarks
“It's important to understand how market swings relate to your own savings and investments.” Do you find yourself glued to the daily news reports on market movements wondering about your own savings and investments? Before you make any hasty decisions, be sure you understand how these reports relate — or don't relate — to your individual portfolio. The variance in the returns of different portfolios is largely attributable to their asset allocations. If you have a well-diversified … [Read more...]
Coping with Market Volatility: Understand How Your Biases Can Affect Investment Decisions
“Understanding your biases may help you avoid questionable calls in the heat of the financial moment.” When it comes to your finances, "go with your gut" might not be the wisest adage to follow. In fact, it may work against you, particularly in periods of market turbulence. Before jumping to conclusions about your finances, consider what biases may be at work beneath your conscious radar. Recency bias refers to the tendency for recent events to have a stronger influence on your decisions … [Read more...]
Coping with Market Volatility: Continuing to Invest May Help You Stay on Course
“Try not to let short-term anxiety make you forget your long-term plan.” In the current market environment, the value of your holdings may be fluctuating widely — and it's natural to feel tentative about further investment. But regularly adding to an account that's designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, the bottom-line number on your statement might not be quite so discouraging. And a basic principle … [Read more...]
Coping with Market Volatility: Cash Can Help Manage Your Mindset
“Consider how a cash position could enhance your ability to make thoughtful investment decisions.” Holding an appropriate amount of cash in a portfolio can be the financial equivalent of taking deep breaths to relax. It could enhance your ability to make thoughtful investment decisions instead of impulsive ones. Having a cash position coupled with a disciplined investing strategy can change your perspective on market volatility. Knowing that you're positioned to take advantage of a downturn … [Read more...]
Bear Markets Come and Go
“If you are losing sleep over volatility driven by a cascade of disheartening news, it may help to remember that the stock market is historically cyclical.” The longest bull market in history lasted almost 11 years before coronavirus fears and the realities of a seriously disrupted U.S. economy brought it to an end. If you are losing sleep over volatility driven by a cascade of disheartening news, it may help to remember that the stock market is historically cyclical. There have been 10 … [Read more...]
Coping with Market Volatility: Avoid Rash Decisions
“During periods of market volatility, avoid making investment decisions based on emotions.” If you've been watching the market lately, perhaps the first question on your mind is, "Should I make a big change in my investments?" In reality, a volatile market isn't the best time to do a complete makeover of your portfolio, especially if you have long-term financial goals you're trying to address. Even if you feel that your portfolio needs adjusting, maintaining a firm grasp on your fundamental … [Read more...]
Handling Market Volatility
“The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return.” Conventional wisdom says that what goes up must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when your money is at stake. Though there's no foolproof way to handle the ups and downs of the stock market, the following common-sense tips can help. Don't put your eggs all in one … [Read more...]
Holding Equities for the Long Term: Time vs. Timing
Legendary investor Warren Buffett is famous for his long-term perspective. He has said that he likes to make investments he would be comfortable holding even if the market shut down for 10 years. Investing with an eye to the long term is particularly important with stocks. Historically, equities have typically outperformed bonds, cash, and inflation, though past performance is no guarantee of future results and those returns also have involved higher volatility. It can be challenging to … [Read more...]
