By Colleen Weber, CFP®, CPA

You don’t have to be a 24-hour news hound to know the investment sector is enduring a period of market volatility. If you’ve checked in with your brokerage account in the last few weeks, you’ve probably noticed significant peaks and valleys in your portfolio balances.

While the situation may feel ominous, the truth is that we’ve been here before and come out the other side. Although some historical events have permanently reshaped the American economy, they have not dismantled it.

If you have a strong financial plan in place, you don’t need to make too many changes to your investment approach. Here are some reliable lines of action for navigating the fluctuations of investment market volatility.

1. Keep Long-Term Portfolio Health in Mind

Your investment portfolio should already be constructed with long-term goals and perspectives in mind—which the vast majority of regular investors do instead of focusing on short-term gains.

Diversification is the biggest key to mitigating risk during market volatility. Blending a variety of growth-oriented stocks with more stabilizing bonds and cash is a common way investors reduce the effect of short-term losses.

With investing, staying committed to a plan is far more important than reacting to temporary market swings. A disciplined investor is far more likely to withstand times of market volatility by concentrating on the bigger picture and future goals.

2. Look for Opportunities

No one relishes a market downturn. However, market volatility can present some unexpected opportunities for stability and even profit. Professional investors use market pullbacks to find fundamentally sound companies at a lower cost. In fact, if you’re contributing to an employer-sponsored 401(k) plan, its managers are already making those investments for you. 

This isn’t a matter of timing the market to beat an oncoming crash. It’s about keeping your portfolio active and steady with reliable commodities. That approach allows you to reap the benefits as the markets bounce back.

As of the latest data, the S&P 500 has entered correction territory, experiencing a decline of approximately 10.1% from its recent all-time high. The average maximum downturn in a positive year has been 11% over nine weeks. Roughly every 365 days, the stock market undergoes a 10% drawdown. This means despite the tumult, this volatility is nothing unusual. In fact, it’s normal and even healthy!

3. Keep Your Emergency Fund Intact

Every long-term investor should set up an emergency fund. But it’s even more important to do so during times of market volatility.

When emergencies happen, this fund serves as a buffer for unexpected expenses. If you need major auto repairs or home maintenance, an emergency fund can save you from shedding investments at a discount to pay for them.

Financial professionals recommend keeping an emergency fund with at least three to six months of living expenses. It can assist you with short-term disruptions while your portfolio stays oriented toward long-term goals.

4. Stay Disciplined

Markets rise and fall, and companies come and go. But the overall marketplace has remained intact, overcoming occasional downturns and getting back on track every time.

Some of the worst days in the market are followed by some of the strongest. Investors who don’t panic or dodge in and out stand to gain from those recoveries. Discipline may be tricky to maintain, but it rewards.

Stay Grounded During Market Volatility

Volatility and risk are both parts of investing. With a strong investment strategy in place, temporary losses won’t derail your overall financial health. Instead, you have a solid foundation that can allow profits to turn in the future.

The Colleen Weber CPA, CFP team can help you stay grounded when market volatility hits. Get in touch to find out more. Book a free introductory meeting online or call (952) 470-0750. 

About Colleen

Colleen Weber is a fee-only financial advisor, CERTIFIED FINANCIAL PLANNER® professional, and CPA based in Chanhassen, Minnesota. With more than 20 years of financial planning experience, Colleen provides comprehensive financial planning and wealth management. She specializes in serving clients nearing retirement, retirees, busy professionals, and women. She is passionate about developing financial plans that save clients on taxes and investment strategies that help them pursue their goals. Learn more about Colleen by connecting with her on LinkedIn or booking a complimentary phone call meeting.