Investors suffered greatly in 2022 following a roaring bull market that began when the coronavirus market bottomed in early 2020. The S&P 500 market index has modestly rebounded from its yearly low as of October 23, 2022, although it is still down nearly 20% year to date. Volatility is expected to persist for the foreseeable future because of the high level of uncertainty in the environment. What should investors do to survive market volatility? Here are a few tips to consider. 1. Consider your long-term objectives as opposed to short-term portfolio fluctuations The sad truth is that short-term stock market volatility is always possible. Although the market occasionally trades relatively flat, these are often only brief lulls between significant up- or down-moves. Except for a few handfuls of fortunate investors, timing the stock market has proven to be a terrible strategy to generate money. The longer you play, much like when you gamble in a Las Vegas casino, the more probable it is that the odds will catch up with you, and you’ll lose all of your short-term earnings plus some. Betting on the market’s long-term success and track record is a better wealth-building approach than trying to outwit it. Remember that if you lose 50% on your short-term transactions, you’ll need to make 100% on your subsequent trades to break even. That is a challenging strategy for achieving long-term investing goals. 2. Make a few “safe” investments part of your portfolio. Even if you are comfortable taking on a lot of risks, there is nothing wrong with keeping a portion of your portfolio in safer products. While lower-risk investments may provide you with a lower potential long-term return, they frequently increase in value or retain their value better during bear markets. A portfolio with reduced volatility may ultimately provide you with higher returns simply by keeping you committed through market downturns, as time in the market is one of the significant factors in long-term investment performance. 3. Continue to diversify Maintaining a diverse portfolio that suits your financial goals and risk tolerance level is one strategy to lessen the impact of a turbulent stock market. A diverse portfolio can lower risk even though it cannot eliminate losses, as not all of your assets will grow simultaneously. While some of your assets may be losing value, others may be gaining or at least losing value at a slower pace, which might lessen the daily fluctuation of your entire portfolio. This may also help you avoid panic selling at market lows, which is crucial to accumulating money over the long run. 4. Watch for Fed rate increases The Fed has started a vigorous campaign of rate increases to fight inflation. Although forecasts vary greatly, shocks might send the market into another short-term downward spiral. While the market is undoubtedly unpredictable, if you can add more funds to your portfolio, any short-term selloffs can convert into long-term possibilities. Try to view pullbacks as opportunities to purchase more shares at a discount, as it can help you cope with the volatility. 5. Avoid succumbing to investing FOMO Chasing high-flying momentum stocks that you know little about other than the fact that they were promoted on an internet message board is one of the worst ways to invest. Over the past two years, the “meme stock” craze has taken over the stock market, sending stocks like GameStop up an astounding 400% in only one week. When equities like these decline 50% or more in a couple of days, you seldom hear about the remainder of the story in the news, even though the media frequently cover similar swings. Investors who attempt to buy many of these stocks out of a sense of urgency sometimes lose money, especially in erratic markets. 6. Work with a consultant Working with a financial adviser has several benefits, one of which is having someone to “hold your hand” when things become rough. The emotions that all investors experience during a turbulent market can be managed with a skilled advisor who can act as a credible source. Your adviser should reaffirm your long-term investing goals and assist you in making decisions free of emotion, which can be challenging to accomplish while sitting at home and reading the financial headlines.
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