This is the first installment in an eight-part series: Navigating Market Volatility. In simple terms, market volatility is the relative rate at which the market goes up and down. Dramatic shifts can be scary, even for the most experienced investors. To keep market swings from making you anxious, take steps to help you respond to volatility in a deliberate way.
Navigating Market Volatility: Have a Plan
Often when people think of successful investing, they think of trading on a “hot” tip or chasing the hottest trends. Sure, you may read the occasional story about someone striking it rich by “playing the market,” but those get-rich-quick stories are the exceptions, not the rule. For most of us, successful investing isn’t about becoming a millionaire overnight, it’s about watching our savings grow over time.
The most successful investors have a plan in place tailored to their personal investment objectives and financial situation. When formulating your investment plan, take into account your time frame, available capital, risk tolerance and savings objectives. Be realistic and specific when determining your short-term (buying a new car next year) and long-term (retirement in 10 years) goals. Having a plan in place can help ensure that you’re making investment decisions based on sound reasoning, not on emotions. And with sound reasoning behind your choices, you will be less likely to trade on a “hot” tip or chase the latest “hot” trend, and lose.
If you don’t feel comfortable making your own investment decisions, there are professionals who can help. Consider purchasing shares of an actively managed mutual fund, or hiring a knowledgeable financial advisor to help lead you on the right path. In the long run, the cost of investing your hard-earned money in something you don’t really understand may be much higher than the cost of hiring a professional to do it for you.
All investments are subject to risk, including the possible loss of the money you invest. Past performance does not guarantee future results. There is no guarantee that any particular asset allocation, or mix of funds, or any particular mutual fund, will meet your investment objectives or provide you with a given level of income.