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5 Tips for Weathering a Volatile Market


5 Tips for Weathering a Volatile Market

By Kelly Pedersen, CFP® 


The daily gyrations of the markets have many people on edge, to say the least. That should come as no surprise considering the S&P 500 is down 21 percent so far this year, and the Nasdaq has lost nearly 31 percent year to date (as of the time of this writing).

Between the lingering effects of the pandemic, ongoing supply chain woes, and the war in Ukraine, there is no shortage of global issues that are weighing on investors. The volatility in the markets reflects that angst. Often more “emotion” than data-driven reality, many average investors can get caught up in the unease caused by wildly fluctuating market indexes.

It’s not fun, I get it. But there are ways to weather this volatile market and retain your sanity. Below are my five tips: 


1. Have a plan and stick to it … but don’t be complacent:

Many advisors will simply advise clients to “hold tight” and “stick to your plan” during times of economic uncertainly. That is good advice … to an extent. Yes, it is critical to have a current financial plan that aligns with your objectives, time horizon, and risk tolerance. That said, within a carefully constructed plan there are always opportunities to capitalize on current market dynamics. For example, bond funds may well present a great opportunity in the near future to buy at a discount and generate a higher yield by moving short durations longer. Also, tax loss harvesting and private equity holdings are valuable tools in this market environment.  The point is to be strategic with your plan and not overly tactical.

2. Never invest more than you are willing to lose:

When markets dive, it’s a good (albeit painful) reminder that investments don’t always go up. If you have significant short-term needs for your assets, think carefully about how much and where you invest. Only invest as much as your lifestyle allows, especially considering that your investments, at least for a time, could temporarily go down in value, meaning less cash to access if you need it.

3. Wait for the markets to stabilize before making any strategic changes to your investment strategy:

When the Dow drops 1,000 points in a day, you may feel a panicked urge to sell or fundamentally change your portfolio allocation. Don’t. Wait until the market settles down to work with your advisor to carefully and thoughtfully make adjustments to your portfolio based on your risk tolerance, personal financial plan and time horizon. The time to act is during periods of calm when thoughtful considerations, not emotions, are the driving factor behind your investment decisions.

4. Private markets can offer refuge from volatile markets:

Diversification is key with any investment portfolio, and private investments can be a great fit for many investors. Not only do they often provide returns that can outpace public markets, but by investing directly with private companies, you avoid being exposed to the daily ups and downs of the value of those investments. Because they are not publicly traded, reporting on private investment valuations typically happens monthly or quarterly, giving nervous investors a much-needed break from day-to-day, hour-by-hour pricing.

5. Turn off the news  / social media:

Take a break. Resist the urge to check your phone or social media feeds every five minutes to see how much the market has gone up or down. Unless you’re a professional investment advisor, it’s just not helpful. Go for a walk. Play with your kids or grandkids. Read a book. Take a nap. The markets will always have very short bursts of irrationality – that’s actually a good time to invest. Take solace in having a well-constructed financial plan and a team of advisors to help you navigate through the inevitable ups and downs of the markets. Keep your sights set on your long-term goals and take a deep breath. After all, the stock market has been through all types of economic environments and weathered them all in the long term.  The key is setting yourself up to be able to weather them emotionally.    


Discuss strategies to navigate the current volatile market.