The ups and downs of the market not only plays a toll on your finances, but on your emotions as well. As you’ve worked hard for the funds you’ve accumulated, it’s tough to see any type of loss. When there is a large loss or consecutive days of a down market, you may be inclined to move your investments around to help eliminate losing everything.
Avoid Rash Decisions
If you've been watching the market lately, perhaps the first question on your mind is, "Should I make a big change in my investments?" In reality, a volatile market isn't the best time to do a complete makeover of your portfolio, especially if you have long-term financial goals you're trying to address. Even if you feel your portfolio needs adjusting, maintaining a firm grasp on your fundamental investment strategy can help you be more thoughtful about making any changes.
Think of each investment as a tool in your investing tool kit, and your asset allocation strategy as your blueprint. Some investments are generally designed to pursue long-term growth, others to provide income, and still others to represent stability. Each is valuable in its own way, but it doesn't make sense to use a hammer to remake your portfolio if what you really need is a screwdriver to make minor adjustments. Don't randomly abandon one investment for another unless you know its intended role in your portfolio, whether that role is still appropriate, and the pros and cons of any replacement you're considering.
Remember diversification can help offset the risks of certain holdings with those of others. When one type of investment is losing ground, another may be gaining or holding steady.
Diversification and asset allocation cannot ensure a profit or guarantee against a loss, but they can help you understand and manage investment risk.
In these uncertain times, it's easy to let fear guide your decision making. But when it comes to your investments, a more rational outlook may be your strongest ally. We're here to help and to answer questions.
Continuing to Invest May Help You Stay on Course
In the current market environment, the value of your holdings may be fluctuating widely — and it's natural to feel tentative about further investment. But regularly adding to an account that's designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, the bottom-line number on your statement might not be quite so discouraging. And a basic principle of investing is that buying during a down market may help your portfolio grow when the market turns upward again.
If you are investing a specific amount regularly regardless of fluctuating price levels (as in a typical workplace retirement plan), you are practicing dollar-cost averaging. Using this approach, you may be getting a bargain by continuing to buy when prices are down. However, you should consider your financial and psychological ability to continue purchases through periods of fluctuating price levels or economic distress; dollar-cost averaging loses much of its benefit if you stop just when prices are reduced. And it can't guarantee a profit or protect against a loss.
If you can't bring yourself to invest during this period of uncertainty, try not to let the volatility derail your savings program completely. If necessary to help address your concerns, you could continue to save, but direct new savings into a cash-alternative investment until your comfort level rises. Though you might not be buying at a discount, you could be accumulating cash reserves that could be invested when you're ready. The key is not to let short-term anxiety make you forget your long-term plan.
Reach out to our CFS Financial Advisors today!
Volatile markets are stressful and can cause people to react and make quick decisions about their finances. Before decisions are made, reach out to a professional and discuss your strategy and possible solutions. Contact Investment Services, provided by CUSO Financial Services, L.P. (CFS),* today at: 513.243.6510 or email Todd Blessing at: email@example.com or Erik Waldron at: firstname.lastname@example.org.
Although there is no assurance working with a financial professional will improve investment results, a professional can evaluate your objectives and available resources and help you consider appropriate long-term financial strategies.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.
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*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a Registered Broker-dealer (Member FINRA/SIPC) and SEC-registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. General Electric Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.