Coronavirus has been plaguing the stock market for weeks pushing the markets to recent record lows! Market volatility can lead to some serious stress on the part of new and old investors alike. The constant up and down of the market can bring fear to even the most seasoned of investors. There are periods that are less volatile, but the days with no movement in the major market indices are few and far between. When dealing with market volatility, it’s important to keep several things in mind to help avoid making major mistakes.
Have a Plan
Have a plan that’s made for you and your retirement. Taking on the appropriate amount of risk for your situation can be the most important thing you can plan for. Proper planning can help win the race. Sticking with your plan will help allow you to take advantage of the periods when the stock market is down.
Keep Reinvesting
Dividends and interest tend to keep coming whether the Dow Jones Industrial Average is down or up on a given day. It’s true that there are situations that will lead some companies to cut or suspend their dividends. However, many companies will keep paying out dividends as long as possible because a cut could cause them to lose investors and see the price of the company’s stock drop. Dividends from stocks and interest from bonds are two ways to deal with volatility. You should consider continuing to reinvest the capital your investments throw off. When the market is down, you’ll be able to buy more shares, and this can add to your flow of dividends and interest. By reinvesting during periods of volatility, you’ll be able to take advantage of the power of compounding.
Emotions
Emotions can drive short-term moves in the market. These emotions can lead to some wild short-term swings in the stock market.
Retirement Impact
The impact of this market plunge is different for everyone. This is why it’s important to have a plan in place that is made for you. How much risk should you be taking on in retirement? If your portfolio gets out of balance, it might be a good idea to rebalance it in the event of a major market downturn to take advantage of the sale price on stocks. If you have cash sitting on the sidelines, volatility to the down side can be a great time to put that money to work. It’s a good time to speak to your financial professional for guidance.
Source: https://www.franklintempleton.com/investor/resources/tools/five-strategies-to-help-deal-with-market-volatility
