Six Tips to Manage Volatile Markets

Posted: 8/23/2019 by Fidelity Viewpoints

When markets get choppy, it may pay to have a plan for your investments.

Key takeaways

  • Uncertainty is a constant, and downturns happen frequently. But market setbacks have typically been followed by recoveries.
  • Stay disciplined: Trying to time the market has proven challenging—and could cost you.
  • Plan for a variety of markets: An investing approach built with your goals and situation in mind may help you cope with short-term volatility.
  • Consider help: You may want to look at a professionally managed solution.

1. Keep perspective: Downturns are normal and typically short

  • Market downturns may be unsettling, but history shows stocks have recovered and delivered long-term gains.
  • Over the past 35 years, the stock market has fallen 14% on average from high to low each year, but still managed gains in 80% of calendar years.

2. Get a plan you can live with—through market ups and downs

  • Your mix of stocks, bonds and short-term investments will determine your potential returns, but also the likely swings in your portfolio.
  • Pick an asset mix that aligns with your goals, timeframe, and financial situation, and you can stick with despite market volatility.

3. Don't try to time the market

  • It can be tempting to try to sell out of stocks to avoid downturns, but it's hard to time it right.
  • If you sell and are still on the sidelines during a recovery, it can be difficult to catch up. Missing even a few of the best days in the market can significantly undermine your performance.

4. Invest consistently, even in bad times

  • Some of the best times to buy stocks have been when things seemed the worst.
  • Consistent investing can give you the discipline to buy stocks when they are at their cheapest.

5. Get help to look for positive aspects of a down market

  • While no one likes to lose money, your financial advisor may be able to help you take advantage of a down market.
  • Tax rules may let you use losses on some of your investments to reduce your future tax bills, a strategy known as tax-loss harvesting, or use lower share prices to convert to a Roth IRA at a lower tax cost.
  • Down markets may also be a good time to meet with your advisor to discuss rebalancing your investments, which can help you buy when prices are low.

6. Consider a hands-off approach

To help ease the pressure of managing investments in a volatile market, work with your advisor to determine a strategy that fits your risk tolerance.


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