Market Volatility: A Reality Check for the Long-Term Investor
You don’t need to be glued to the news to know that the investment landscape is experiencing turbulence. A quick glance at your brokerage account in recent weeks has likely revealed noticeable swings in your portfolio’s value.
Although uncertainty can feel unsettling, history has shown markets have weathered volatility before and emerged resilient. While certain events have left lasting impacts on the U.S. economy, they have never dismantled it entirely.
If you have a well-structured financial strategy, there’s little need for drastic changes to your investment approach. Here are some time-tested strategies to help you navigate market fluctuations with confidence.
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. This 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!
Granted, the second Trump administration has been more unpredictable than the first. But we can expect more leveling out as the administration finds its footing.
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.
Remain Steady Through Market Swings
Market fluctuations and risk are inherent in investing. However, with a well-structured investment plan, short-term losses are less likely to jeopardize your long-term financial stability. Instead, you have a resilient foundation that positions you for potential future gains.
The Rosamond Financial Group provides the guidance you need to help you traverse market ups and downs with confidence. Book a free introductory meeting online, call my office at 830-798-9400 or email solutions@rosamondfinancialgroup.com.
About Preston
Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing solutions@rosamondfinancialgroup.com or schedule a call on his online calendar.