Dealing with Uncertainty

Knowing that market volatility is inevitable is one thing, but when it actually happens, remaining calm and staying focused on the long term is a different thing. That’s when it makes sense to revisit these basic long-term investing principles:

Don’t Panic

Do not get too excited when the market is high, and don’t get too discouraged when it drops. Resist the urge to overcorrect. Selling in a panic means you’ll have less invested in the future to generate dividends or participate in any potential recovery.

Stay Invested

Even the experts cannot predict when markets may turn. Trying to “time the market” usually leads to poor decisions.

Stick to Your Strategy

When a sailor encounters rough seas, he will keep a steady hand on the tiller and his eyes on the horizon. In investing, the equivalent is to maintain a good, balanced mix of assets aligned with your needs, goals, time horizon and risk tolerance.

Diversity*

Your financial professional can help ensure that your portfolio includes a healthy mix of investments that align with your personal situation. By owning a diverse variety of assets, you may be able to create a portfolio that is somewhat shock resistant.

Rebalance

Market fluctuations can throw the mix of investments out of line with your objectives. A big market drop can also offer the chance to add investments at sale prices.

Be Patient

While nothing in life is guaranteed, history shows us that major stock market declines are historically followed by recoveries to new highs. Sometimes it takes weeks, and sometimes it takes years. But every major bear market so far, through 2019, eventually recovered and reached new highs.**

*Diversification cannot eliminate the risk of investment losses. Past performance won’t guarantee future results. An investment in stocks or mutual funds can result in a loss of principal.

** https://www.morningstar.com/features/ what-prior-market-crashes-can-teach-us-in-2020