Don’t become distracted by short-term volatility
Trying to navigate the ups and downs of market returns, investors seem to naturally want to jump in at the lows and cash out at the highs. But no one can predict when those will occur. Fortunately, there are a number of time-tested strategies that may help you deal with market volatility. Two of the most prevalent are: invest for the long term, and maintain realistic performance expectations when it comes to returns.
By coupling these strategies with maintaining proper portfolio diversification and avoiding the pitfalls of market timing, you’ll have the foundation needed to help manage your overall exposure to market volatility.
Historically, the stock market has been up more than down. Often after a lengthy bull market, some investors may lose sight of the fact that their investments could generate negative returns. In order to keep market volatility in perspective, it’s important to maintain realistic expectations about your investments, especially if returns move closer to their historical average.
It’s vital to focus on your long-term goals and not become distracted by short-term volatility. While losing money in the financial markets is never easy to accept, remember the old adage: time is on your side.
Typically, the longer an investment portfolio is held, the more likely overall positive results are realised. The lesson here is to prepare for the long haul and try not to overreact to periods of uncertainty.