Staying on Track During a Volatile Stock Market
Here’s How to ‘Future-Proof’ Your Long-Term Investments
Investing in the stock market isn’t for the faint of heart, and many news stories can cause your panic level to rise when you aren’t prepared to ride the natural highs and lows. However, you’re not alone in your worries about the future. In fact, 60 percent of Americans report feeling stressed by simply thinking about the stock market. The good news is, if you have planned your long-term investments properly, they are actually built to ride the highs and lows of a mercurial market. Remember, investing is a long game; if you prepare properly, you can overcome short-term volatility. Below is a three-point checklist to help you protect your investments through a rough period.
Step 1: Diversify Your Investments
While there’s no sure-fire way to guarantee yourself complete protection, having a diverse portfolio is one of the best ways to protect your assets. When you hold various types of assets, you’re less likely to take a loss on all sides even in the worst market scenarios. In addition to your investments, it’s also important to maintain savings – both long-term and short-term – to help you weather the unexpected. If you’re approaching retirement, it may be time to look over your portfolio and consider reposition gains into more secure assets, such as bonds or ETFs (Exchange Traded Funds) or a money market account. Don’t let fear get the best of you, though. It can be tempting sometimes to think about pulling all your money out of the stock market, but impulsivity will only hurt you financially in the long run.
Step 2: Understand Your Relationship to Money
Once you’ve looked over your investments and made sure they are nicely diversified and that your savings plan is on track, the next step is to take a look into yourself. Your lifestyle and spending may be as volatile as the stock market, but you have the power to make changes to benefit your financial situation. So, look closely at your budget. Think ahead to your future goals and expenses. Are you planning to downsize? Have you always wanted to live abroad? Perhaps you want to go back to school or start a new career late in life. What about your spouse’s goals? This is a good time to have frank discussions with your family about the future, especially lifestyle preferences, expenses and overall goals. If your budget shows you’re wasting money on non-essentials in your daily life, make a plan to better use that money to serve the long-term goals you and your spouse agree upon. When you take time to visualize the future and map out a plan for it, the more you will understand how much money you will need. These exercises also make you much more prepared for a discussion with a professional financial advisor. Open communication helps everyone by managing expectations and allowing you to adapt as needed to stay the course.
Step 3: Long-term Over Short-term
Once your portfolio is in tip-top shape and you’ve got realistic ideas about the future and what money means to you, you get to sit back and watch your plans unfold. The stock market will likely continue to show volatility from time to time, but it’s important to trust the process. Markets do ebb and flow, and true wealth gain takes time. As Warren Buffet has said, “If you don’t feel comfortable owning stock for ten years, you shouldn’t own it for ten minutes.” So, when the 24-hour news cycle inevitably makes you anxious with stories about market declines and unemployment rates, focus your attention on your financial long game and know that you’ve set yourself up to ride the waves of the market.
If you’d like professional advice on your investments, it’s always a good idea to consult with a financial advisor. By partnering with someone who can help you keep an eye on your assets and shift them as needed over time, you can give yourself additional peace of mind, trusting that your money is working for you and will provide for the future you’ve designed for yourself.