10 Tips To Handle Stock Market Volatility

“The stock market is a device to transfer money from the impatient to the patient.”  Warren Buffett

Investors tend to dislike turbulence but need to understand that it happens. Periods of calm alternate with volatility. Turbulence is a force of nature of the stock markets to be reckoned with. Often, that is the best time to buy stocks of good companies.

A Good Financial Plan Helps To Navigate Volatility Better

1. Put Your Financial Life In Order

Before investing, make sure you have savings that can pay for your basic needs now and for any unforeseen circumstances. Create an ample emergency fund that is liquid and can take care of six months of monthly fixed costs such as rent or mortgage, food, and car payments, and along with unplanned financial costs.

2. Diversification

As you accumulate assets, you want to allocate your portfolio among different classes and different types of accounts. You want to spread risk into different but complementary baskets such as stocks, money markets bonds, and real estate.

3. Asset Allocation

Review your investing and rebalancing strategies periodically to make sure your holdings reflect your goals. Set up different investing accounts depending on its purpose, notably for retirement, 529 savings plan, and insurance.

4. Don’t Sell Your Stocks Out Of Panic

It is not unusual to feel dread at prolonged declines in the market. The market can be a very humbling place to be in. Sometimes stocks decline on no new news yet the drops feel like they are on automatic pilot. The financial news headlines sound like the opposite of what you read the day before.

5. Keep Emotions In Check

Don’t act irrationally. If you have food on the table, a roof over your head, you and your loved ones are healthy, things are good.

6. Don’t Time The Market You always hear the adages: “As January Goes, So Goes the Year,” “Sell in May and Go Away,” “Buy Low” and “Sell High,” but no one can truly time the market. No one can predict the beginning of a recovery with precision or sell on the perfect day before the start of correction.

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