How to Navigate Market Volatility Investing During Uncertain Times

Market volatility can be unnerving, but it is a normal and expected feature of long-term investing. Investors can prepare for these periods by following four steps.

Developing an investment strategy with the help of a professional financial advisor can provide peace of mind during volatile markets. By incorporating your goals, risk tolerance and tax situation, you can be confident that your investments are working for you.

1. Reframe Market Volatility as an Opportunity

Market volatility can be a challenge for some investors, but it doesn’t have to be. For those who invest in a portfolio that’s aligned with their financial goals and time horizon, the ups and downs of the market are simply background noise. They may not even notice when prices rise or fall if they are invested in long-term growth assets, like equities and non-cyclical sectors, such as consumer staples or healthcare.

Those who understand the drivers of market volatility, how to navigate volatility, and strategies that are designed to create risk-adjusted returns can take it all in stride. This is why it’s important to remain committed to a portfolio that’s structured to fit your personal needs. It’s also helpful to stay in touch with your financial professional, who can offer guidance and review your plan, as needed. They can also help you reframe your thoughts about market volatility and how to respond to it.

2. Rebalance Your Portfolio

Rebalancing your portfolio is an important part of investing. This process helps to ensure your investments are properly diversified, which is the investing version of “don’t put all your eggs in one basket.” Over time, a stock-heavy portfolio may become riskier than you intend or need based on your financial goals and tolerance for risk.

A rebalance is a way to buy more of the underperforming asset class and sell some of the overperforming asset class in order to return to your targeted asset allocation. Generally speaking, it’s best to rebalance a portfolio on a regular schedule (e.g., yearly) or when it’s out of balance by a predetermined threshold.

Market turbulence can be unnerving, but it’s also a normal part of investing. When you remember that the long-term goal is what matters, it can help reduce anxiety during bouts of volatility. If you’re uncertain about how to navigate these difficult markets, consider consulting a wealth management professional from U.S. Bancorp Investments.

3. Stay Focused on Your Long-Term Goals

Market turbulence can cause some investors to question their investment strategies and wonder if they are doing something wrong. It is important to remember that bouts of market volatility are normal and inevitable in the long-term investing landscape. If you are saving for retirement and investing in accounts that are designed with a long-term horizon, your regular contributions can help offset some of the emotional impact of short-term losses.

It’s also a good idea to diversify your portfolio. Periods of market volatility may reveal that a portfolio you thought was diversified in fact isn’t, so it’s a good time to reassess your asset allocation and make any necessary adjustments.

Finally, it’s a good idea to try to avoid letting your emotions drive your investing decisions. Remember, following your feelings can lead to impulsive investment decisions that could cost you in the long run. If you are unsure how to navigate market uncertainty, consider working with a financial professional. They can help you determine a strategy that aligns with your goals and risk tolerance.

4. Don’t Let Volatility Derail You

Many factors can influence investment decisions: financial goals, asset allocation and diversification strategies, tax benefits and, indirectly, how investors feel about market turbulence. Emotions can be especially influential in volatile markets. They can lead to impulsive trading that may do more harm than good.

For example, when stocks are rising, investors may believe the market has nowhere to go but up. In the same way, when prices decline, it can trigger fear or euphoria. Emotional investing may lead to buying high and selling low, which can skew returns.

While it’s difficult to ignore short-term market movements, keeping your eye on the long term can help you avoid letting volatility derail you. A wealth management professional from U.S. Bank or a robo-investor like Automated Investor from Schwab can help you maintain an objective perspective and stay focused on your financial goals during turbulent market conditions. They can also review your portfolio to ensure it’s diversified and positioned to meet your objectives, even in volatile times.