Market volatility can be frightening. Watching stock prices fall and interest rates rise is nerve-wracking, especially if most of your retirement funds are tied to investments. What should you do when the market is unpredictable? How can you protect your finances (and your emotional well-being) from the dangers of a volatile market?
Unfortunately, there isn’t much you can do to affect the market or make your investments completely safe. By changing your perspective on investing, however, you can overcome those anxious feelings and develop a plan for long-term financial stability.
Short-term vs. Long-term Gains
How should you view ups and downs in the market? Chances are, your perspective is based on your history as an investor. In most cases, individuals with a long history of investing tend to view market dips very differently than those who have just started investing.
When you initially put money in the stock market, you will probably follow your investment closely for the first few months. This isn’t bad, but a month-by-month view of the market is often very different from a year-by-year perspective.
Market downturns can seem insurmountable if you’re looking at the changes in your assets each month. When you view things over the years, however, those bumps tend to smooth out, and you can see the long-term gains your investments are making.
The True Potential of Investing
One of the hardest things about investing is realizing that you don’t have any control over the market. The stock market is influenced by countless forces, including politics, weather, and world events. You can’t really control any of those things or their effects on the market.
This realization can be especially challenging for business owners who are able to control some things that affect profits. In your business, you can react and protect your assets when the market dips.
You can’t do much to change the market, but you don’t necessarily have to worry about every natural disaster or political fight affecting your investments. Yes, those things can create highs and lows in the market, but they aren’t the sole creators of change.
When you invest in stocks and companies, what you’re really investing in is people. You’re putting your faith in humanity’s ability to face challenges, innovate, and find solutions. And if history has shown us anything, it’s that people will always do those things. The managers and employees of the companies you invest in will find ways to adapt to new challenges and succeed in the long run.
Staying the Course
When the market dips, it’s tempting to make big changes to your investments. Changing your portfolio can make you feel like you have control, but it’s not usually the right call. It’s much better to remind yourself that the market will rise and fall but overall, it will trend up. When you leave your money invested, even during a downturn, you can look forward to growth when the market goes back up.
Take a Long-Term View of Your Investments
Being an investor in a down market is never fun, but it’s vital to remember that downturns don’t last forever. The market will recover, and your investments will grow. Investing means counting on the ingenuity and persistence of people, and those things will always win in the end. The best thing you can do right now is to be patient and avoid making big changes to your portfolio.
The best financial plans are built for long-term success. They can weather the temporary dips in the market and still gain value over the years. If you don’t have a long-term financial plan, Guiding Wealth can help.
We are dedicated to helping every client grow their wealth and keep it safe despite market dips. Our team of Certified Financial Planner™ experts can help you build a customized financial plan based on your values and goals. To get started, call 214-810-3835 or schedule a consultation online.