3 Ways To Manage Your Emotions When Markets Are Volatile

While market volatility can be unnerving, it’s important to stay calm and focus on the long game. Investments that generate good returns over an extended period are can be subject to short-term market corrections, based on driven by changes in the economy, laws, or other business conditions, for example. Don’t let these short-term losses distract you from the your long-term investing goals of growing your savings by being invested in the market. Instead, focus on what you can control and know which actions you can take.

Check out these three tips to help you stay on track with saving for your future financial goals:

1. Keep Your Investing Time Frame in Perspective

   If you have decades before you plan to use your money, don’t focus on short-term movements in the stock market. Instead, remember how and why you created your portfolio in the first place. Stocks are more volatile than most other investments over the short term, but historically have better performance over longer time frames than lower-risk investments.
   If you’re investing for the shorter term and plan to access your money in three to five years or less, make sure your portfolio allocations align with your risk tolerance.

2. Use Dollar-Cost Averaging¹ to Your Advantage

   Dollar-cost averaging simply means that you invest on a regular scheduled basis. So, over the full market cycle you bought in up and down market points. This kind of autopilot approach helps you to stay the course, keep your emotions in check, and reduce the temptation to try to time the market.

3. Diversify Your Investments²

   It’s impossible to predict what investments are going to perform best, so it makes sense to spread your money over several types of investments with varying levels of risk. While diversification doesn’t insulate your portfolio from market volatility, a mix should include funds that invest in large-company stocks, small-company stocks, and international companies, as well as bond funds and cash.

Footnotes/Disclaimers

^¹ Dollar-cost averaging does not assure profit or protect against loss in a declining market. Since it involves continuous investment, investors must consider their ability to continue to invest during low price levels.

^² Diversification does not protect an investor from market risks and does not assure a profit. An investor must consider the risk associated with all investments used to diversify assets.