Are you getting a roller coaster feeling about your investments?

Investing Roller Coaster PDF

Whether it is your 401k or other investments, the last few weeks have probably seemed chaotic at best and perhaps even terrifying. This is never a feeling that you should experience and before you panic, remember there have always been market downturns. Fortunately, there are several moves you can make to help you get through this volatile market that will also prepare you for the next market downturn when it comes.

What are the most important actions not to take during a time like this?
First and foremost, don’t look at your investment portfolio or 401k every day or even weekly. Checking in once a month is fine and yet even better would be looking at balances on a quarterly basis. The second action is to avoid pulling everything out of the market and looking for a safe haven. This can lead to selling low and then buying high when you want to get back into the market, causing you to miss some or most of the gains on your investments.

Are volatile markets a normal occurrence for investors?
Unfortunately, this is something that occurs more than people think. US stocks experience over 3 downturns of 5% every year, one correction of 10% per year, and usually a correction of 15% or more every 3 years. This doesn’t mean that your investments will track the same because it depends on what is in your portfolio. Your experience could be more or less than what is happening in the market. This is one of the reasons that true diversification is so important and that you should keep all market swings in perspective.

What are ways that people can calm their fears?
Start by having a plan that you can live with in all market conditions, ups and downs. For many this means they might need to work with a professional to help them craft a plan that fits their individual risk profile, timeframe, and goals. The second important way to calm your fears is to understand that down markets all present opportunities for when the market rebounds to grow your portfolio even more. Don’t panic and create a crisis that might not exist for your financial situation. This is also a reminder that when times are good, you should pay attention to your 401k and investments to ensure you are always updating and rebalancing.

What is the best advice for everyone regardless of the market situation?
There are a few tried and true approaches everyone can use that help during a market downturn:

• Develop a portfolio that fits your risk profile
• Make sure you have a well-diversified portfolio
• Focus on consistent investing rather than trying to time the market
• Regularly rebalance your portfolio and update your plan
• Keep perspective on your individual plan and not the market as a whole