What To Do In Volatile Markets

So far in 2018, we have seen a lot of market volatility. There are various reasons for the volatility: trade wars, tweets, interest rates, and more. In fact, 2018 has been the most volatile year in the markets since 2008.

While this year has brought on more volatility than normal, this type of volatility isn’t unique. In fact, volatility is a normal part of investing and something you will experience quite often if you’re going to be invested for multiple decades (which I recommend if you have the time).

So if you’re going to experience these types of market fluctuations many times throughout your life, it would be wise to know what you should do before they happen, so that you act with a plan in place as opposed to reacting based on fear or emotion.

With that in mind, here are three things to do in volatile markets:

Buy More

This might feel like the most unnatural thing in the world. We all love to see the stock market (and our investments) continue to go up and up.

But if you’ve got the money to invest, you really shouldn’t be hoping for higher prices. In reality, you want prices to go down as far as possible in the short term, so that you can buy more shares at lower prices.

This isn’t natural. We are predisposed to hate to see the stock market fall like this. Which is odd, because it’s the opposite of how we operate in other parts of our life. For instance, let’s say you’re looking for a new basketball (like I was recently). If it’s normally $60, I’m happy when the price goes down to $50. That’s a 16% discount!

That should be our exact attitude when (not if) stocks go down. Think about them as if they’re on sale. And when things that you want (and need) are on sale, what do you do? You buy more!

So as tough and unnatural as it may feel, when you see the stock market down 10% (or more) from its highs, I’d encourage you to think about actually buying more – even more than you normally do.

Do nothing

If buying more is too tough for you emotionally – or you simply don’t have the extra cash to buy more right now – then my next tip for you is to do absolutely nothing.

Don’t freak out that your investments are down, and whatever you do don’t sell. Take a deep breath, remind yourself that this is temporary, and then go on with your life.

And if you find that you’d like to buy stocks but don’t have the money for it, ask yourself what you can do in the future to make sure you have a little extra cash for the next time the market falls.

Revisit your plan

Now if you’re still freaking out about the market downturn, wondering if things will be okay, if you’re in the right investments, you need to go talk to your financial planner and revisit the plan that you’ve created.

Bounce off your concerns and your questions with them. They’ve been through this before and have felt the same feelings that you’ve had.

They will help you avoid making emotional decisions with your money. I don’t want to downplay your emotions – they are real and they should be considered. But when making long-term financial decisions, we want to make factual, evidence-based decisions. We simply don’t want to be swayed to make life-altering decisions on a temporary emotional pain.

Working with an independent, well educated financial planner can give you the confidence that your plan is solid – or to make changes if necessary.

So there you have it. If you find yourself watching a volatile stock market, follow these simple and effective tips. First, buy more! If that’s not an option, do nothing. And if you have lingering concerns, please revisit your plan with a CERTIFIED FINANCIAL PLANNER™.

If you need help doing some (or all) of this, please reach out. I am a CFP® Professional who is committed to always acting in your best interest. We can go over your current plan or create one if necessary. You can call me at 424-258-4460, email me at scott@forthrightfinances.com, or contact me here.