Managing Market Volatility

The market may fluctuate but focusing on things you can control will help you resist the urge to react on impulse.

First, don’t panic. The ups and downs of the stock market aren’t as unusual as they may seem.  Over the long history of equity markets, sharp moves up and down often take place.

You may be tempted to make big changes to your investments by moving to less volatile investments in the short-term and moving back into the market when you feel more comfortable, but trying to time the market has its own risks. The market can be volatile and that makes trying to time the market very risky. Research and history shows that you’re going against the odds when attempting to accurately time when to get in and out. For market timing to pay off, an investor has to correctly predict when the market will go up AND when it will go down – or vice versa. If you’re wrong about the timing of one of these events, you could lose.

You may also be tempted to sell more volatile assets entirely. Resisting the urge to react to volatility, however, may allow you to benefit when the market recovers. It may be best to focus on the factors you can control, like how much you’re saving or where you’re directing future contributions. Once things settle down you can then focus on constructing a portfolio that reflects your risk tolerance and your long term retirement planning strategy. Disciplined investing and managing your reaction to a bad market day or week could be the best approach.

Remember—saving for retirement is a marathon, not a sprint. Find the plan that works for you and then stick to it.